Buying off-the-plan can be a good way to get into a high-growth market with a minimum cash outlay. Sam Saggers of Positive Real Estate reveals his time-tested strategies to make the most profit from buying off-the-plan and reduce your risks.
- Understand the market cycle for future growth. Do this by considering the six market drivers (population, economics, demographics, infrastructure, yield variation and supply and demand).
- Choose low-density, boutique properties.
- Always buy in stage one of a development because it will be at the best price. Never consider any other stage. Developers withhold further stage releases in order to make additional profits and sell the properties at a high rate of return.
- Buy a property at least 18 months off the plan, which will allow the property price to increase and, with just a deposit down, you should secure 100% cash on cash return.
- Always have the “plan” valued at the commencement of the contract process. You need to buy at the plan’s value at the beginning and not the value at the end. Valuers call this method “valuation summation” which involves the cost of land and the building.
- Don’t get in over your head. Buy properties under $600,000 as they appeal to the entire market should you be required to sell.
- Always plan to settle. Never buy to sell midway through the project’s construction. You should always confirm your borrowing capacity first before entering into an off-the-plan contract.
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