Tips for Investing in “Off The Plan” property
By Michael Poynter
Buying Property “Off the Plan”
There are several things to consider when purchasing new property. The following are a few things to consider and has been generated from the experiences of many.
i)Financial Incentives
Off the Plan purchases (“OTPs”) traditionally carry low stamp duty costs (as duty is based on the land component which is generally not significant) and often also comes with incentives in the form of rental guarantees. Building depreciation is a considerable tax incentive as well.
As your financial adviser will no doubt support, never buy a property for tax or short term saving considerations. Remember, the market has a way of finding equilibrium and competitor purchasers have no doubt factored in the benefits too, putting a natural upward pressure on the price!
ii) Development Quality
Like any significant asset purchase, make sure you do your due diligence. Just because it is new, don’t make any assumptions about the quality of the property.
Review some of the other projects completed by the developer and get some feedback on their resale value and building quality.
iii) The Contract
OTP contracts are often confusing and will deal in a range of scenarios surrounding completion dates and contingencies for construction overruns amongst other things.
It is important to also check any restrictions on the title that may limit tenancy profile.
Make sure your solicitor reviews the contract before you commit to the purchase.
iv) Finance and Settlement
OTPs are not always the darling of banks and mortgage insurers. They often raise concerns about issues such as high density apartments, city locations or over supply. Make sure you check a financier willingness to support your property before committing.
Another potentially stressful element is the Registration of the Plan of Sub Division. Typically, once this is done, you have 14 days to make settlement. However, most financiers will want a final valuation after Registration, meaning finance is not unconditional, leaving a rush to make settlement including document preparation.
About Michael Poynter….
Mike has been a practicing lawyer in Melbourne since 1989, and currently heads up MCP Groups’s team providing legal services to individuals and small businesses.
The legal services include Commercial and Small Business Law, Property, Asset Protection, Estate Planning, Family Law and Litigation. In addition the team supplies a range of personal services, including Conveyancing, Probate and Estate Planning.
Further information is available at http://www.mcpgroup.com.au/
Buying Off The Plan Property
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