Buying off-the-plan simply means you’re buying a property or a building that is yet to be built. It’s a risky investment. That is, should you decide to push through with it, you’d have no concrete idea if the property you bought will meet your expectations.
Off-the-plan investment property takes a long time to develop, which means the property’s worth can be less than what you paid for by the time construction is done. Because of this, it’s vital to know the risks and benefits of buying an off-the-plan investment property.
3 Benefits of Buying Off-the-Plan Investment Property
There are many benefits of opting for an off-the-plan investment property. Among them are:
Availability of government grants
Check if you are eligible for a government grant. If you’re a first time home buyer, it might be helpful to look into the First Home Owner Grant (FHOG), a national scheme which has been in place since 1 July 2000. It helps a first time home buyer by offsetting the effect of the GST on the property payment. The criteria will be dependent on your state or territory government, so make sure to contact your corresponding office to check if you are eligible.
Stamp duty concessions
Stamp duty or transfer duty is a tax levied by the state and territory governments when a resident is buying any property in Australia. If you’re planning on buying off-the-plan, you may want to look into getting an exemption or a concession. It will be dependent on your circumstances. Thus, make sure to also check with your corresponding state or territory government. They have eligibility criteria in place for those who are looking at reducing their stamp duty or avoiding paying it altogether.
Incentives from the developer
Developers recognize the risk in asking property buyers to invest in something they can’t physically experience yet. That is why they have different incentives in place to entice possible buyers. Some examples are lower investment property prices, furniture packages, or even gym memberships, among others.
3 Risks of Buying Off-the Plan Investment Property
There are, however, risks involved when choosing off-the-plan investment properties. We list some of them below.
May not be at par with expectations
One of the most common perils of buying an off-the-plan investment property is that it may not meet your expectations once the construction is done. There is no guarantee on what the final structure will look like, and you have no assurance that it will look exactly as promised.
Delays in construction
Weather and other unexpected factors may cause delays in the construction of the property. However, there is a buyer’s safety net that’s common in off-the-plan contracts. This is called the sunset clause.
Sunset clause is one which states the date when the developer has to finish the property. If the property is not completed by the indicated date, the contract might be voided and you, the buyer, could refund your deposit. Make sure to check your Contract of Sale for this clause. You might need to get a property lawyer for better guidance on this matter.
Poor structural quality
Another risk of buying off-the-plan is that the completed building may have structural issues. When buying off-the-plan, you won’t have any history of the property to check, so you won’t know until the building is completed. Make sure to do your research and check that the developer is a trusted one.
Be Smart When Buying Off-the-Plan
When it comes to an off-the-plan investment property, make sure to do your research and compare developers or even home loans. Investing in a property is a big move that requires smart decision-making. Make sure to do your part and look-up any information that can help you.
Fortunately, we have a number of articles here at Makes Cents that could help you. Keep browsing through!
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