Buying property off-the-plan, if done well, can be the beginning of a profitable journey for investors and owner-occupiers alike. And that means you too, first-home owner.
If executed well, buying off-the-plan can reap substantial rewards. And by ‘executed well’ we mean: consider market timing, do your research, make peace with your nerves and get a really good lawyer to help navigate the complex contract you’re about to cradle.
Increasingly, it’s not just investors who buy off-the-plan, with owner occupiers also seeing the up-side of buying tomorrow’s investment at today’s price.
So, let’s look at some of the factors that influence an off-the-plan purchase:
1. Market timing
There’s no shortage of data showing that people are increasingly moving away from rural areas and concentrating in big cities. With land prices what they are and undeveloped land a scarcity in city areas, the only way is up. Literally. People are increasingly living in medium density housing (shop-talk for apartments). And it’s these types of more dense living options that are often marketed off-the plan, as well as being the residence of choice for inner-city dwellers. Of course, no discussion on market timing would be complete without looking at the how the real estate market is performing too. This will obviously influence your decision greatly.
2. Do your research
The risks associated with off-the-plan purchases going pear-shaped are there. Google it, you’re sure to find some horror stories. But with thorough research you can buy from a trusted developer with a proven track record. In short, reputable developers tend to make fewer mistakes. And where possible, try to inspect properties that the developer has completed so you can gauge the quality of the workmanship.
3. Make peace with your nerves
At the end of the day, the logic of buying an off the plan property is similar to other investments. You need to weigh the pros and cons as they apply to your life and circumstances. You will also need to understand your level of appetite for taking risks and your ability to mitigate them; because buying off the plan means that you are buying something you can neither see nor touch. You are essentially buying a promise.
4. Get a good lawyer, But …
Get intimate with the contract. Seriously. If you’re going to do this right, and your research is showing up mostly green lights, then the contract is king (or queen). And it’s possibly your back door if things go wrong. Don’t hand this responsibility to your lawyer – a good property lawyer is still vital to this process – but you are the one making the transaction. And you are the one that needs to fully understand all possible areas of risk and what your next move might be in all given circumstances.
Buying off-the-plan is not for the faint-hearted. It’s not for the impulsive type. And nor is it for those who think ‘due diligence’ would make a great name for a character in a romance novel.
There’s a lot of good procedural-type information out there. Information that will help you to understand the process and pros and cons of buying off-the-plan. Get online and educate yourself.
Still, with all that said, buying off-the-plan can be a complex and a sometimes risky path to financial nirvana, but clearly you’d be out of your mind not to consider it an option if you’re looking for property, when so many have gone before you and come out the other end satisfied.