Buying new versus what old and the pros and cons of each especially buying off the plan.
Now where to start with this topic, as I find it is one the most disputed areas of buying an apartment there has to be. For some, it’s a no go where others will only buy off the plan. I will admit if it is something you are going to live in, then nothing beats walking into a property that no one else has ever lived in before.
Be warned that developers now can and do rent the properties out. So unless you buy before the property is constructed, your new apartment may already have lost some of its brand new shine. This is where buying a second-hand property in the same complex may end up being cheaper, especially if the seller has no choice to sell.
Now if you are buying off the plan and it is your first time there is a whole new set of rules that you must know about, it is entirely different from buying an established property. Purchasing a property off-the-plan means entering into a contract to purchase a property before or during its construction. Unlike finished second ownership properties, you will not be able to inspect the final property until all building has been finished.
Is what you see on paper what you will end up with.
Get everything confirmed in writing on the contract before you sign a thing, I am saying this, especially if construction has not even been started. I meet people all the time who loved the display unit thought they were getting the same finish in their unit only to find that they didn’t even end up with window coverings.
So all I am saying is get all the added extras you want in writing first. Another note is to also make sure that the building plans, dimensions, and layouts are fixed and will not change unless signed off on by you.
Another thing to consider, especially if buying off the plan before construction has started is what view are you going to have once it is built. I would never recommend buying off the plan if you have not at least looked at the development site and had the agent at least point out to you where your unit will sort of be located.
Make sure that the floor plan is desirable for the living and that unless it’s cheap your view will not look straight into a brick wall of another building. Ideally, you don’t want the bedrooms backing onto the balcony of the unit next door and hallways are great for your noise reduction out to your neighbours, you don’t want everyone knowing your business.
You should receive a full building specification and also one of your unit. The plans should show the full dimensions of all rooms including bathrooms, laundry, kitchen and bedrooms. Make sure that the doors, windows, tiling and cabinet layouts, and dimensions are to scale and clearly defined.
The price issue.
This is tricky, especially coming off a booming market into the downfall that has been the last few years. Here we have seen prices drop by nearly 50% on new projects since people went to contract and some people ruined because the banks, didn’t value the property at the original contract price.
This then makes it very hard for me to recommend buying off the plan right now, but the market is changing. Some people have made small fortunes off buying off the plan. If that is what you are looking at doing, then research into the market cycle and the timing would be your best indicators for when to purchase.
Also always check the clauses of the contract, as when the market is going up the developer may try to make you pay more for your apartment. Their reason will be because the property values more and their construction costs were higher. Developers have many clauses to cover themselves, so make sure you read the fine print of the contract before you sign.
Once the building is constructed the first body corporate meeting.
This is the most important body corporate meeting I will say ever. It is when all the little items and added extras that owners want gets approved (well mostly).
I highly recommend turning up for this meeting if you can or at least have someone there on your behalf. Ever wondered how some apartments seem to have extras, that no one else has or can be allowed mostly it is because of this initial meeting.
The costs involved and also the tax advantages
Find out how much the body corporate, rates, water, and other fees are going to be before you sign anything. Don’t go by approximates always get the facts. The body corporate will not be set until the building is finished and on new buildings, usually for the first few years it is below average.
Also, make sure that the property you are buying can be used for either yourself to live in or that you have the option of holiday or permanent letting. Some buildings also are strict on the type of property manager, you can have, so please make sure you check these options over. It might seem like nothing now, especially if you are looking to move in but for resale value and quickness, it matters.
The tax advantages a very high for brand new properties currently in Australia, so get a great accountant and listen to them as really that is what they get paid to do for you.
Who is the builder and are they going to be around to finish the job?
Ok, so up until a few years ago I would not have brought this up as a point to think about, but knowing it happened with a very big development here I thought it best to. This building isn’t as good as it would have been had the original developer finished the building. While this is something that usually doesn’t happen, it can and is not something you can control.
This can make a huge difference in the final quality and reputation of a building, I say this more as just something to be aware of. As to finding out about the builder, it’s great to also visit some of their other development sites and even try to talk to some of the current owners living in them.
Look at the other completed properties for the quality of the building finishes. What you see at their past projects, can be what you can expect to see at your new property.
How long will you have to wait for the finished product?
Another thing to think about is how long is it going to be before your new property is liveable and ready for you to start using. Some new developments can take years before they are finished so this is something to think about, but there again it can be a great thing, especially as all you need is the 10% deposit and can have years even to get the finance to pay for the rest.
A few final points.
Make sure that the information supplied to you regarding capital growth, rental incomes and expected holding costs for the property is current. Cross check all this information with your own independent research, to make sure that the property will work for you.
Still, make sure you carry out your fair share of due diligence on the building complex and also the developer to ensure you are getting exactly what you pay for.
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Until next time as always, do your research before putting pen to paper.
Happy investing and have fun.
Thank you for taking the time to read this post, I would love to hear about your experiences with buying off the plan compared to purchasing a second-hand property.