Benefits of buying positive property off the plan
April 19th, 2013 • No comments
There is significant new development occurring in some of Australia’s positive property hotspots such as the Northwest and Central Queensland, offering investors a variety of opportunities to invest off the plan.
Many consider off the plan property to be a high risk investment but with thorough due diligence it can generate excellent returns with low cost entry.
One of the major draws of buying off the plan is that a deposit of around 10% will secure the property. Pre-approval on finance will be required but the balance is generally not be payable until settlement.
With construction completion often taking six to 12 months, there is an extended timeframe for settlement and investors can take advantage of this to improve their financial position and benefit from any capital growth. As the property is purchased based on a fixed price contract, any equity the property generates between the deposit payment and settlement is the investor’s capital gain.
New properties also command top rents and investor profits can be further increased by taking advantage of tax depreciation, which is maximized for new properties. They also have minimal maintenance costs.
In addition to conducting comprehensive market research, it is vital that investors conduct due diligence on the developer. The developer’s track record, design and quality of projects, and capacity to deliver on schedule should be analyzed before committing to buy.
This includes investigating factors that can significantly affect a property’s value and rental yield such as floor plans, fittings, finishing’s and appliances.
Workmanship and products should be of high quality with suitable warranties. Ensure the process for rectifying defects is clear and assess the options for the customization of floor plans and fittings if it will add value and attract quality tenants.
Investors should review the contract carefully and seek legal counsel if they need clarification on the term and conditions.
Off the plan purchasing typically offers a low cost entry into the property market and in some states investors can avoid paying full stamp duty, making it a desirable option for first time investors.
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