Essential Tips of the Trade
Buying off the plan can be an interesting challenge but if you do your homework into the numbers, do they stack, how likely are developers to deliver on their promises and is the contract condition beneficial for your situation you have covered your bases.
Here are some tips:
The first properties released usually go for the cheapest. An off the plan purchase means you can lock in the ownership of a property, without having to settle for an extended period of time, so capital growth can often make your initial deposit more valuable in the meantime. The long settlement period means you have some breathing room to take care of the investment, or to save money and reduce the amount of finance you will need to borrow. Getting in early allows you to choose your purchase from a range of properties within the development.
Doing your research:
The benefits show that buying off the plan can be a strategy that works for many investors. You have to do your regular research to ensure that the numbers work for you, including finance, return, growth potential, gearing and depreciation benefits.
Buying off the plan involves signing an off the plan contract of sale, which is drafted and tailored quite differently to a normal contract. Before signing, seek legal advice from a contract and property law professional. It is important to check that adequate plan disclosure, deposit controls and requirements, inclusions and warranties, defect rectifications, stamp duty payments and completion dates are included in your contract.
Perform a background check on the developer. Visit the company’s website. You should be able to access information relating to past and present projects. Have a look at them if you are uncertain about the developer’s credentials.
Home warranty insurance:
It is the developer’s legal responsibility to provide home warranty insurance cover before entering into a contract for the sale of the off the plan property, provided the contract is for more than $20,000. The insurance covers the owner of the property for loss or damage resulting from non-completion of work, loss of deposit, or breach of statutory warranty.
Residential buildings of more than three storeys in height are generally exempt from home warranty insurance cover, but construction of a multi-unit residential building of less than three-storeys (not including car park) requires the developer to attach a home warranty insurance certificate to the contract for sale.
Financing the purchase:
Final finance approval can only be confirmed within 90 days of settlement even if you have had pre approval. So wait until the building is complete and settlement is less than six weeks away before applying for formal approval.