Buying property off the plan is becoming an increasingly more popular choice, helped by its wealth of benefits and affordability, compared to buying an established property. With just a 10% deposit required, it's easy to see why owner occupiers and savvy investors are attracted to this property option.
However, there are plenty of important factors you need to consider when buying off the plan, so before you decide to buy. See the factors below: Get your finances in order Firstly, you need to get your finances sorted, pay off any outstanding debts and learn what your borrowing capacity is. This will determine your maximum budget and what properties you can afford to buy. A reputable Mortgage Broker can help with this. Understand the property market Whether you are an owner occupier or investor you need to understand the property market which means thorough research is required. You should look at current vacancy rates, rental yields, and demographics alongside comparable sales and any proposed future developments which could impact your property purchase.
Research the developer You also need to research the developer to ensure they are reputable and trustworthy. Find out their experience, what past projects they have worked on and whether these were completed on time. You should also check the developer has received legal Approval, to reduce the risk of the development not proceeding. Don't get emotionally attached It's easy to get emotionally attached when buying property particularly as a first home buyer. However, you shouldn't let your emotions cloud your judgments as it can mean you overlook the more important factors such as capital growth, rental yields and vacancy rates. Try to concentrate on the solid facts and figures to determine whether this property is a good investment or not, rather than letting the pretty pictures sway your decision. Be prepared for delays Before you purchase, find out whether the developer has reached their pre-sales target and when construction is expected to start. A boutique development will have a shorter build time compared to a high-rise development. However, bad weather can create delays, pushing back settlement. Consider the risks Buying off the plan has its risks, but knowing what these risks are and how you can mitigate them will help you to minimize your risk. Things to consider include:
Settlement might be delayed - Adverse weather can cause delays so make sure the sunset clause provides ample time to cover this.
Property might not proceed- If the development does not have legal Approval, then there is a chance the property might not proceed.
Capital growth lower than expected- Your property might have been overvalued, which means you might have to pay more if your lender won't provide additional funding.
In spite of the risks, property is one of the safest means of investing. As banks back property, they have a vested interest to help maintain a stable property market. Buying costs Although you won't be paying a mortgage yet, there are other costs you need to be mindful of. Besides the 10% deposit, you also need to pay legal fees, whilst on settlement there are also stamp duty, borrowing costs and even property management fees to consider, so make sure you have sufficient savings to cover this. Seek legal advice As buying off the plan is slightly different to buying an established property, it is essential that you use a reputable lawyer or conveyance who is familiar with off the plan contracts to review the contract first before you sign.
Avoid using the cheapest lawyer as this could cost you dearly in the future if your property faces problems and you need to refer back to your signed contract. Think of the majority of buyers Keep in mind future buyers when you buy your property, as if you end up selling later on, you want your property to appeal to as many buyers as possible. It would be harder to sell a one-bedroom apartment in an area known for families with children. Speak to a Property Consultant As buying a property is likely to be one of the largest purchases you will ever make, it can be quite a daunting and stressful experience. Working with a Property Consultant such as Rama Homes Ltd and Buy and Rent can help make this buying process easier. We can provide you with the latest research whilst inform you of the best areas to buy in right now.