One of the important considerations you will need to make when buying a property is, should I buy an established home or off the plan? Whilst the excitement of being the first person to live in the home and the flexibility to choose your floor plan and colour schemes may be appealing, there are also some common pitfalls that you need to be aware of if you intend to buy off the plan.
Following are some of the pros and cons of purchasing off the plan property:
THE ADVANTAGES
– One of the advantages of buying off the plan is that you will pay the current market price for a property, even though it will be completed in the future.
– You have more time to save (particularly if construction hasn’t started yet) so you won’t need to borrow as much.
– It can be more affordable. If you buy very early in the process developers are often keen to secure sales for the project to go ahead.
– State governments (in certain states) offer grants and reductions in stamp duty for buying off the plan which can save you thousands of dollars.
– Newly built properties in Australia come with a 7 year builder’s guarantee which means structural or interior building faults must be repaired by the builder.
THE DISADVANTAGES
– There is a risk that you may pay too much for a property if the market falls between the exchange of contracts and building completion. If this does occur you may find it difficult to secure finance for the full amount as valuation of the property will not match up.
– As many builders do not allow you to see the property until construction has completed, there is a risk that what you envision is not what you will receive. The quality of work may also not meet your standards. There could also possibly a long delay in the completion of the property.
– Most importantly, when the property is ready and if there has been a change of circumstances in your job or anything that might affect your borrowings, this may impact you in getting a loan from the bank.
Happy Investing
About the writer – Denjola Bhutia is an active residential property investor and owner of Nine Ten Finance. If you’d like to have Denjola provide advice on your finance structure and investment strategy, simply get in touch with him – it’s a FREE service with no obligations.
