The process of purchasing property can be a daunting time, especially for first home buyers. Finding funds quickly that are required for a finished property with a short term settlement can be a hard and challenging task. For those looking to enter the property market, buying off the plan may just be the ticket. If one chooses to purchase a home “off the plan” this means the property hasn’t physically been built yet and is not a tangible structure. However, buyers are able to see drawings and plans. If buying off the plan is something you might choose as an option, here are some things to consider:
This process of buying off the plan may sound unorthodox in the usual real estate world. However, it can pose many advantages to first home buyers such as time to save for settlement, time to plan for settlement, potentially time for capital growth prior to settlement and time to make all the relevant applications for the first homeowners grant. Not only this but buying off the plan will mean you also receive stamp duty discounts as well as tax benefits if you choose to rent.
The primary advantage often appealing to buyers is the set price is being paid for a home that is yet to be completed. This means that you may end up paying a lot less for a property than it’s worth at the time you move in, factoring in the property could increase significantly during the time it takes for your developer to build the home.
Similar to the first point, paying a set price can mean your property significantly decreases in value by the time it is built. With the fluctuation of real estate prices, there is no guarantee the price you have agreed upon will perfectly reflect the homes overall worth and value, given its position on the market at the time of completion.
So, What Do You Need To Do Before Signing A Contract?
Research into any major decision that poses risks. A professional can help you gain a thorough understanding of the current property market and its estimated future. Not only this but looking into the area in which you are planning to build will give you an in-depth understanding of the current rental prices, demographics, vacancy rates and employment statistics. Lastly, buyers need to do their due diligence on the developer before they sign a contract. The biggest risk they face when buying off the plan is losing their deposit if the developer goes into administration during construction. Looking into their past projects, reviews and even articles will give you some clarity about the overall quality of their workmanship.
You can also check out this article for questions you should ask before buying off the plan.
CALCULATING YOUR FINANCES
A big appeal to first home buyers when it comes to buying off the plan is that only a small deposit is required initially. While this may seem easily achievable, you must remember that you are entering a building agreement. Which is why having stability in your finances is important. Shopping around with different lenders will mean that you are getting the best loan which is ideally fully approved. Having a fully or pre-approved loan will allow you to enter the agreement confidentiality and may even allow you to extend your settlement time.