Buying off the plan means buying a property before it’s constructed, based on the plans and projections of the developer.
Say, for example, you wish to buy an apartment as an investment property. You could go to the auction of an existing property and make a bid in the hope that you will be successful. The constantly evolving market may mean that you could be waiting a long time before you find a property in the right area, and place a winning bid.
In contrast, buying off the plan locks in the price of the property, even if the completion date is a year or two in the future.
Here are 4 key advantages of buying an investment property off the plan.
1. Getting in early can give you the best price
New property launches usually feature a ‘pre-public’ stage followed by a ‘public’ opportunity to purchase. In most cases, this occurs before construction has started. Investors who don’t get in early often miss valuable opportunities. Investors who access VIP pre-public releases enjoy significant advantages.
When there are fewer units remaining, developers can begin to raise the price. Once the apartment complex is built, it becomes possible to raise the price even further.
In the world of property investing, you often hear, “I wish I’d bought there ten years ago.” With an off the plan investment, you can get in on the ground floor – or the penthouse, if you prefer!
And remember that the price is locked in, so after you have paid the deposit you have a clear savings goal to aim for until settlement. In the meantime, if the market grows, you’ve made some equity gains.
2. Stamp duty and depreciation
Stamp duty can slug investors when buying an existing property. But buying off the plan allows investors to minimise this cost. For example, if you bought a $240,000 property off the plan in Victoria, you would save approximately $9,000. Concessions vary from state to state, so check the local conditions with your property investment strategist.
Buying off the plan means you are eligible to claim depreciation based on a new property. Once your property is completed and quantity surveyed, you can begin to reap the benefits of claiming annual depreciation on everything from the bathroom taps to the air-conditioning unit.
3. Off the plan property is easy to hold
By buying off the plan, before the property settles, you have the advantage of holding a property without any of the financial or administrative issues associated with it – paying a mortgage, managing tenants, or paying bills.
During the construction period your property may even increase in value, even though you have outlaid only the deposit.
4. Look for those X factors
An X factor is infrastructure that adds value to a residential area. It could be a new shopping complex, a hospital or railway line that will put upward pressure on the value of properties in that area.
Delayed settlement with an off the plan purchase means the effects of an X factor will happen gradually, increasing the value of your property over time. Find out which areas in your city are earmarked for an X factor development over the next decade or so and think about investing in those places.
Getting in early on a development, avoiding stamp duty, ease of holding the property and X factor developments in infrastructure are four distinct advantages of buying investment properties off the plan.
One final word – location is often the best drawcard for any property. Choose yours wisely, and you are on the way to turning your investment into a success.