If you want to acquire an off-plan property, you will be looking at a huge investment.

And it doesn’t really matter which Area of Australia you are looking at making your investment.  

Though places like Liverpool, CSW, South Australia, Melbourne Western Australia might be more expensive areas to consider, any off-plan real estate zone will require a significant stake on your part.

This is why buying off the plan can be a bit of a stressful process because it comes with a lot of mixed feelings and uncertainty since you are yet to see what you are paying for with the possibility of the eventual property differing from what you were promised.

However, if you are well informed and consider the essential key factors before you sign, you will be fine with your choice.

What Is Off Plan An Off Plan Property And Why You Should Consider It.

Buying a property off-the-plan means that the apartment or house that you are buying is yet to be constructed either partly or fully.

This means that as an investor, there won’t be any property to inspect thereby making your buying decision to be based on the available plan, design, specifications, and the quality of information that you have.

The reason why some investors prefer off-plan property investment is that it is cheaper and offers significantly higher returns.

This tries to offset the risk of purchasing a property that is yet to be completed and to compensate the investor for not being able to immediately take possession of his investment straight away.

When the property has been fully constructed, the price goes up thereby reducing the possible returns on the investment.

The key questions to ask before buying off plan Property

It is important for you to ask the right questions when buying off the plan in Brisbane, Sydney, Melbourne, and other places, some buyers are unaware of the extent of the contractor’s power and what they can and can’t do.

It doesn’t matter if you choose meraas, Meriton, Mirvac, Cbre, Nakheel, or any other company, a buyer doesn’t have as many rights as the contractors and this limits his control.

 Here are a few questions to ask and things to be very clear on when considering an off-plan property…

• What is the reputation and experience of the company you are buying from?
• Do they have other completed projects and what are the Reviews on them?
• Do they have an after sales provision for their buyers to help resolve issues?
• If they don’t deliver on the agreed timeline, how would that impact you?
• Try to see as many other things as possible such as photos or design sketches and if possible, take a 3D tour of the proposed building.
• Be certain of the timeline so that you won’t find yourself in a financial squeeze.
• Know if you qualify for First Home Owner Grant.

These are the many things to be clear on before you go ahead to sign anything and move forward with the process.

Do you need pre-approval to buy off the plan?

It is possible to get pre-approval from your bank depending on its assessment of the off-plan deal as this will determine how much they will be willing to lend based on the property evaluation.

The bad side of this is that Your bank might want to give you the requested facility only when the construction is completed.

For this not to happen, you need to prove to your lender or bank that you aren’t a high-risk borrower based on things like your credit score, being a full-time employee, supportive lifestyle, good savings habits and the likes.

Your bank may still want to make its loan to be conditional on the valuation being carried out after construction and you need to check whether this will be the case and consider whether this is a risk you would be willing to accommodate.

The Pros of buying off plan properties

When making a heavy financial decision like off the plan investment, you need to check in on the costs and benefits.

And here are some of those to consider…

The benefits of buying off the plan start with the time opportunity that you will get to prepare for your new home as it is not built yet.  This gives you a lot of time to plan and save for your purchase.

You may also benefit from the property value going up in the time it takes to build your new home. By locking in the price when you bought it, you can already see your profits grow if your property value goes up.

It gives you the opportunity to outrightly own a property with a minimal deposit.

Some off-the-plan properties also can be purchased with discounts as the contractor would like all the units sold on the land, making these options even more affordable!

You get the opportunity to own a brand-new house for less than the price it ordinarily would have cost you

The Cons of buying off plan properties

However, the risks of buying off the plan are very different. You run the risk of the builder going bankrupt, essentially halting all construction on your property, and you would have lost your deal and property.

After you sign the contract, there is a chance that the bank will not approve you for a loan, making the actual purchase of your property impossible for you, and if you can’t hand over the 10% down payment, you might lose your stake which has cost you both time and money.

There is also a risk that the construction of your home goes over the sunset period, meaning they do not finish it on time. If this is the case, then you may have to reevaluate your plans for your future.

Buying off the plan property might also get you caught in a housing bubble which would be brutal for people who borrowed too much according to “barefoot Investor”.

Finally, there is also the risk of the final product differing greatly from the promised plan. This might happen because the company is trying to meet up with deadlines, the rising cost of materials, and the likes which could make your house or apartment to suffer quality issues or not include everything you expected.

This is why it is essential to research before you sign your contract because the risks you foresee might outweigh all the benefits.

How Off Plan purchasing process works

• When you find the perfect deal for you, you must consult a lawyer to ensure that the contract given to you has all the relevant information for the purchase.

And this is especially important because of title issues. For example, when purchasing “off the plan”, you are buying a property that doesn’t have a separate title yet. It is essential when buying off the plan conveyancing is engaged to ensure that your contract for purchase is carefully checked.

When this is done, then you can further proceed with the other details which are explained below…

•  Make Use Of the Cooling Off Period if you must: In most Australian states, you have a cool-off period of 3-5 days in which you can back out of the purchase. Some fees may be applied if you do not go through with the original deal, so check the contract properly to know the T and C.

• Check the Project Plans: This shows exactly what is being built and the terms of the construction. Check this to be sure of the promised deliverables and if you are comfortable with the delivery timeline.

•  Know how much Deposit you need to make: Typically, you will need at least a 10% deposit to purchase the property, but this can vary from place to place. Check in with your bank to be sure that you are eligible to get such facility.

It is also essential to know your Loan to Value Ratio (LRV), which is the money being borrowed against the total value of the property.

It is also important to keep your risks low as the bank can determine the total value of your property. If this is an issue, you can turn to a Lenders Mortgage Insurance (LMI) claim. LMI protects the bank if you default on your loan. LMI rates can vary, though, so be sure to compare which rates are best in your state or where you are buying.

• Inclusions: always be sure to check the contract for warranties and inclusions. Sometimes, the contractor will have to make changes to the original build, and it is helpful to double-check what those are and how they affect your overall property and delivery.

• Finance: Be sure you have the money to pay the contractors. Typically, they give you 30 days to secure the money, so be sure to have a plan. Helping you to meet financing deadlines is one place where your banks can be of great help. Make sure that you have them on your side.

• Building Defects: Issues can arise in construction, and it is vital to include a clause in the contract that holds the contractor liable for any changes or fixes they will have to make should any arise.

Many of these are specific to particular states in Australia, so it is important to double-check what applies when buying.