Jul 04, 2018  | Tags: property development, investor, property investor

Our Insights

Buying off the plan is an attractive investment option, especially for new investors. It’s cheaper upfront than buying an existing property, provides an opportunity for fast capital growth and carries some attractive tax benefits.

But there are a few traps you need to be aware of before you start looking to buy off the plan.

Trap #1: You’re taking a risk when you buy an off-plan property 

It’s just a fact that you don’t know exactly what your finished product will look like. You’re already invested without the chance to take a tour first.

Tip for success: Make sure that your contract covers every possible scenario so that you’re protected no matter what happens. Careful attention to detail beforehand will also prevent unpleasant surprises.

Trap #2: Getting emotionally attached to your off-plan property

It’s natural to be very emotionally invested in your property, even if it only exists in blueprints. But if you get too excited too soon, your feelings can cloud your judgement.

Tip for success: Focus on the facts to let the data help you make informed decisions instead of impulsive ones. Get expert help when weighing the pros and cons of any major investment property decision. 

Trap #3: Getting a bad builder 

The worst thing is getting stuck with a builder who won’t listen to you. 

Tip for success: Get to know some builders in the area before you pick one. Scan their websites, ask questions to find out their reputation and check out previous properties they’ve built. Getted recommendations from trusted friends who've been through the process before. Communicate with a potential builder to see if they’re a fit. Ask them about what freedoms you’ll both have during project development.

Trap #4: Not having development approval

If you don’t get development approval in time, your project can fall way behind schedule. 

Tip for success: Make sure your builder has all the needed permissions in place so that things can move forward on time.

Trap #5: Delayed settlement for your off-plan property

Slow settlement can throw you off financially and put your investing plans on hold indefinitely. 

Tip for success: Check that your sunset clause allows for extra time in the event that something like inclement weather stalls your project.

Trap #6: Sudden market fluctuations during development that leave you panicking

You might get worried when five months into building the property market takes a plunge. You may even start to doubt whether buying off the plan was a sound investment strategy. 

Tip for success: Decide in advance how you’ll handle those market changes. You might opt to fix your interest rate on your loan so that you aren’t as severely affected. But most importantly, strive to remain calm and keep a positive long-term view of the situation. Some ups and downs are natural and to be expected. Remember that even off the plan properties are stable investments.

Get the finance right

Before you buy off the plan, get advice from your financial adviser and work with an experienced mortgage broker to get the best possible loan deal. Make sure you understand both the property market and your own financial situation before buying an off the plan property. Know what you can afford to borrow and what risks you can afford to take. Clear away as much debt as you can.

A great mortgage broker will also help you find any governmental grants and concessions that may apply to you. There’s quite a bit of financial aid available to first-time and off-plan buyers. 

Seek legal help when writing up a contract for an off the plan property to ensure everything is aboveboard.

Contact

Want to know if you're in the right financial position to purchase property off the plan? Contact Calder Wealth Management.

Want to get the best possible finance deal? Calder Finance Broking is the best place to start.

Call us on (08) 8373 3333 to schedule your free initial appointment.

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.