Image showcases shelving from top3 by design.
There are both advantages and disadvantages to buying off the plan. Here’s what you should know before signing along the dotted line…
#1 The property is priced at the current market value
One of the biggest advantages of buying off the plan is that you pay the current market value. “This means if the building is due for completion in say three years and the market continues to go up, you could literally make tens to hundreds of thousands of dollars without paying a mortgage.” says Adam Gillbanks, real estate agent at McGrath Estate Agents and top agent on OpenAgent, Australia’s leading real estate agent comparison site.
#2 There are tax benefits
“The newer the building, the more you can claim tax deductions through depreciation.” says Adam.
Cameron Nicholls of Nicholls & Co Estate Agents agrees, saying “The depreciable value is [currently] at its highest and this has a massive benefit with the tax man.”
#3 The completion date can be prolonged
It is possible the project won’t be completed within the scheduled time frame due to a unforeseeable delays, including bad weather during the initial build period. Take the original finish date with a pinch of salt to avoid disappointment.
#4 Changes can occur
“There can be changes within the apartment in regards to the floor plan from what you had initially bought into.” says Adam. “There are often clauses in contracts giving the developers the ability to make changes, [including] the design and layout of the apartment.” This can lead to some cost increases.
#5 Location, location
Nothing can ensure capital growth, but researching the location of your property can often be a good indication. “Think of the investment as a 10 year plan,” says Chris, who suggests investing around growing infrastructure and jobs to be sure of the long term economy.
“Ask yourself what does this location have to offer and will this change in the future.” says Adam. “If the apartment is close to transport, shopping and sought after schools or there is future development/gentrification happening in the area, you are probably going down the right path.”
#6 Know the rental yield
The yield is a measure of income on the property that is separate from capital growth. “If the property has a high rental yield it will likely be positively geared, meaning the rental income exceeds total outgoing payments (mortgage, strata, water, and council).” says Adam.
“If the property rental is not strong you will usually find that the rent does not cover your expenses, meaning you need to subsidise the costs associated with the property. This [does] mean the property is negatively geared, however there are often tax benefits here.”
#7 Ask questions
It sounds the obvious, but ask every little question you can think of so you can be 100 per cent sure about what you’re getting. ‘Assuming’ could lead to an unrealistic picture in terms of the finished product.
Chris says to be aware of “not being able to touch and feel the product and sometimes being misguided with the quality of appliances. For example [if a contract reads] ‘European appliances’, it doesn’t necessarily mean they will be ‘Miele’, they could very well be European, but bad quality.”
Want more? See inside this stylist’s off-the-plan apartment: