Here are the reasons behind why you should consider buying an investment property off the plan.
It is recognised that not all investors are as comfortable with committing to a purchase with only site and floor plans as others, there are some major benefits of purchasing property off-the-plan.
First in - best dressed
One of the greatest benefits of buying off-the-plan is that you get to choose your property from everything that is available in the development depending on what’s sold already. The ability is there to view the development as a whole and decide on the best aspect, best position and best layout. This in turn, can offer better potential for strong capital growth and maximise rental yields.
When developers begin a new project there is a period of market "testing" of the product. They often start with lower prices to encourage a faster sales rate. Once a market is established and construction commences, and the developer has met their construction finance requirements, prices usually rise. Often for investors who commit early to the project there is significant price incentive.
Lock in the property at today's price
When buying off-the-plan, an investor can secure property at today's price yet often not have to settle for up to much longer periods depending in the contract terms – sometimes 24 months or in some cases even longer. The investor gains the full benefit of any capital growth in the market over the period of construction as you have gone to contract. The Developer usually requires a 10% deposit but this can be in the form of a bank guarantee so little initial capital is required.
Both investors and owner occupiers buying off the plan have the advantage of time before settlement. It allows for re-structuring of any areas of your life before the settlement. If you are considering the sale of an existing property this extra time allows you to plan for your marketing and reduce the risk of a rushed sale.
While the 10% deposit needs to be paid early, usually when the contract is signed, the balance of the purchase price does not have to be paid until construction is complete, titles are issued and the sale is finalised. This means you don't actually need your bank finance until about a month before settlement. Since construction can take 24 months or more, it's easier to build your savings and create a buffer account for running the property, or pay a larger amount up-front reducing the need for a large mortgage or mortgage insurance. Some developers will even pay you interest on your 10% deposit until the project is complete, as they have it parked in an interest bearing account.
As we have mentioned new property offers significant tax benefits. Depreciation benefits are greatest when the property is brand-new so buying off-the-plan maximises your available tax deductions. The first 5 years of a new property is where the most depreciation is gained from tax. All the costs are claimable as well with the purchase, and in some cases the stamp duty is reduced. All in all a better deal.
Allen Key Management specializes in all areas of project development including strong ties to every professional required in this field. Should you require any further information on this subject, or on how to become your own developer I can be contacted as follows:
If you are interested in my educational e-books about a wide variety of topics then email me to be on my database.
PO Box 956
SPRINGWOOD, QLD 4127
Hyperdome Technology Park
Unit 2, 11 Knobel Court
SHAILER PARK QLD 4128
Phone: (07) 3440 8677
Fax: (07) 3440 8670
Mobile: 0418 734 404
The above information is supplied by Allen Key Management.
Disclaimer: while due care is taken, the viewpoints expressed by sponsors do not necessarily reflect the opinions of Your Investment Property.
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