9 things to know about buying ‘off the plans’

One of my readers recently asked me about buying an investment property off the plans (a property that has not yet been built).

If you are considering this option, the advice I always give friends of mine is as follows:

9 things to know about buying off the plans…

1. Lock in equity from Day 1?

There can be serious advantages to buying off the plans. Usually you have less competition, and usually you can get the property for a decent price compared to existing homes of a similar size, currently on the market. Hopefully you end up locking in some bonus equity from day 1 (eg. the house values up to more than what you paid for it).

2. Past track record

It all comes down to the reputation of the builder. How many houses have they built? How long has their company been around? How likely are they to go bust before the house is finished?

3. It is critical, critical, critical…

That you don’t settle until full code compliance is issued from the Council. Countless people I know have bought a home without this being complete and paid the consequences later. Once all the money is handed over it is common for the builder to ‘ease-off’ with no deadline in place to keep them focussed.
Make sure you are in a position where you don’t necessarily have to move in on the settlement date so you don’t get trapped in this situation. Ideally you want to have the settlement date extended until after the Code Compliance Certificate is issued by your local Council.

4. Review the contract

Run it past your solicitor before signing – are there strange clauses which say the developers can change the asking price before settlement if the costs go up? (These are common with apartment developments).

5. Speaking of apartments…

I would focus on buying house+land packages. With any real estate purchase it is technically the land that goes up in value, not the house, so apartments usually aren’t as good an investment as a good old family home.

6. Get a registered valuation before you go ahead.

They can value a property based off the plans to give you re-assurance you aren’t paying too much. Find your own valuer – don’t use one the builder / developer knows or has already dealt with (ask the valuer if there is a conflict of interest before hiring them).

7. Look at the design & location.

Is it in a good area, close to schools, dog walking areas, shops? You can’t ignore the need for basic amenities. Re design – think about who your target market is going to be for rental of selling – If it’s young families, then you want at least 2 bedrooms on the same level etc.

8. Don’t forget the basics. Here are some other questions to consider:

What is the sun aspect like? How windy will it be? How will you feel if the build takes 3 – 6 months longer than expected?

9. Funding advantages.

New builds are exempt from the 40% deposit LVR restrictions which is a big plus. Meaning you could borrow more than 60% if buying an investment property off the plans. Click here for more info. This makes a massive difference to how much cash you have tied up in the property. One thing to watch though – what is the expected build time? Eg. Most finance pre-approvals last 90 days or less, if the build takes longer there is a chance your finance could expire before the settlement occurs, which could leave you in a very tricky situation. Before going unconditional it is important to talk this through with your bank or mortgage broker.
Have you bought a home off the plans? Do you have other tips you could share with my readers? Please comment below to share your thoughts.
Further reading:
1 comment
  1. Hi Andrew,
    Thank you for your article, your advice is much appreciated. We are looking at buying into a new development – with a new developer and new construction company. As we have no experience (and it seems they don’t either) we are very concerned that what they say will not be delivered. I would never have thought of employing a registered valurer to check out the venture before the build – I will put this on my to-do list now, if we go ahead.
    Kind regards, Lianne Jeffery

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