Buying a home that doesn’t exist sounds kind of crazy, but it could mean owning the property of your dreams.
Off-the-plan deals sometimes get a bad rap from investors who claim buyers risk paying too much, and you should always see exactly what you’re buying before parting ways with hundreds of thousands of dollars.
But are their concerns justified? Are there any good reasons to buy a property based on figures and artist impressions (and increasingly, virtual reality walk throughs)?
In a nutshell, yes.
Like any major investment, buying real estate off-the-plan can be high risk if insufficient research has taken place. But there are also perks to buying property that has yet to be built.
Here are six of the best:
“One of the well known and biggest reasons for buying off-the-plan property is the potential for huge stamp duty savings,” says Darryl Simms, author and founder of Latte Property.
“For example, in Victoria you could potentially save over $18,700 on a $500,000 purchase if you purchase a new off-the-plan property instead of an established property.”
Stamp duty can burn, especially when you’re a first timer, so ways to save are very welcome.
If you’re buying off-the-plan as an investment and plan to lease your new home to renters, you may be eligible for 1000s of dollars worth of tax deductions, Simms says.
Get a full depreciation schedule from a quantity surveyor once your property settles.
This will assist at tax time when claiming deductions for your new asset’s brand new fittings and fixtures.
“Increased depreciation means your holding costs will be much lower as the tax man is covering a bigger portion of your investment property expenses.”
Pro tips: Investors buying off-the-plan
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It goes without saying that a brand new home – if well built – will not need the ongoing maintenance that an older property often needs.
Changes to the Australian Building Code mean new properties must meet stringent energy efficiency requirements, explains Simms.
Your off-the-plan home should be fitted with some of the most power-saving appliances and gas/water/electricity systems on the market, which is a boon for owner occupants and future tenants alike.
Buying off-the-plan allows you to buy at today’s price. In a rising market, this can mean you own a property worth more than you paid for it by the time the deal settles after construction.
However buyers should view this as “a nice little bonus” not the reason for buying off-the-plan, Simms cautions.
“This can be good, if the value has increased; and it can be bad, if the value has dropped,” agrees Chris Owen, Principal of property maintenance and finance company DRG Property.
“If the value goes up by 20% or 30%, then the biggest concern you’ll have is how to spend the money and whether you should console the developer who wished he’d priced higher … send him a nice Pinot and some tissues.”
Buying off-the-plan is one of the easiest ways to get into the property market.
You only need a 10% deposit today and can pay the balance of the purchase price at settlement, once construction is complete (which might take six months or longer).
Savvy buyers use this time to save towards moving costs, furniture, the home and the house-warming party.
“With more savings to put towards your new property you will be able to borrow less and therefore your loan repayments will be much lower,” Simms adds.