Despite the drawbacks, off-the-plan properties remain a popular investment option. Follow these tips on how to obtain the best deal.
The reasons for avoiding off the plan properties have been well documented, with the majority of leading experts strongly advising against this kind of investment. But despite the drawbacks, off the plan properties remain to be a popular investment option for Australians, particularly amongst keen investors with little to no experience, and first home buyers as they are provided with ample time to save for settlement. Ultimately, all investors are exposed to the same risks and complications involved in purchasing property off the plan.
Investment real estate expert and Dream Design Property (DDP) Founder Zaki Ameer, has felt this negative sentiment towards off the plan from the beginning of his career. Amongst other potential pitfalls, Zaki believes the main risk involved in this type of property purchase is the uncertainty around whether the buyer is receiving a good deal in the first place.
To ensure his clients and others looking to invest are wary when investigating off the plan options, Zaki shares 5 tips on how to obtain the best deal:
1. Beware of dodgy developers
Before entering into a contract with a developer, performing a background check is essential. You will want to research past projects and assess the chances of the developer going into liquidation before the project is complete. If you are doing this without expert assistance, visit any of the developer’s previous work to inspect the quality, and seek references from previous clients. If you would prefer to outsource this process, services such as DDP Developments will ensure the developers are of the highest standard.
2. Choose your property agent wisely
Agents have been known to wine and dine clients, fly them to the development site and accommodate them in 5 star hotels in order to have them purchase the property. What the client doesn’t realise is that these costs and extravagances are packaged into the purchase price of the property. Look for agents that are genuine and open so you know they have nothing to hide.
3. Don’t be fooled by rental guarantees
Developers will often entice buyers by offering a rental guarantee for the first one or two years after completion. As tempting as this sounds, once this period is complete many owners will find that the tenant has been paying an incredibly low rent, with the developer subsidising the difference and factoring this into the purchase price of the property. Make sure the numbers add up correctly before you accept.
4. Beware of potential financial risks
No property investment is immune to the fluctuating property market, including off the plan properties. If the value of the investment property does fall, it usually occurs between the point of purchase and the point of completion. To lessen the financial risks involved, it’s wise to partner with a company that can guarantee to save you money in at least one area of the transaction.
5. Gain legal advice
Seeking legal advice is crucial, particularly for first home buyers. Before you sign anything or money changes hands, have a solicitor look over all the contracts and documents. Ensure the contract contains a “funds set” or a “drop dead” clause outlining the date the property must be completed by. If this is not met, you should be able to withdraw should you wish to, and have the deposit refunded. Other important clauses should relate to “acquisition” and “commencement”, as well as your rights to re-sell the property.