How to Purchase Off the Plan
Whether you are buying a property to own or as an investment, research will play an important role. Learn how to buy off the plan.
Is buying off the plan a good plan? Here are some clever ways to make sure the process runs as smoothly as possible.
Buying a property is one of life’s biggest experiences – especially if that property hasn’t been built yet. But done correctly, buying off-the-plan can be a smart move.
Buying “off the plan” means signing a contract to purchase a property that is yet to be built. Since you can’t physically see what you’re buying, but instead need to rely on plans, designs and the reputation of the project’s management team, this process can understandably generate nervousness in some prospective buyers. But done the right way, buying off the plan can be a very clever investment.
For starters, unlike investing in an existing property, you won’t have to worry about renovating any areas that are a bit worn, giving the place a new paint job or updating appliances with an off the plan purchase. Nick Walker, Mirvac’s Residential Customer Experience Manager, explains that “All of the latest design methodologies are going into new buildings: all the best and latest technologies, fixtures, fittings and materials. You reduce maintenance costs by buying off the plan because you’re covered by the structural and defect warranty periods.” Purchasing at a set price before the project has completed can also be a means of creating solid capital gains on your original investment (assuming the market increases, of course).
However, as with any investment, buying off-the-plan isn’t without its risks, so it’s a good idea to assess the pros and cons before you commit. Here are a few things to consider.
1. Find out who is responsible for each aspect of the build
Every developer operates differently: some outsource big portions of their projects, while others keep it all in-house. Your decision on which developer to go with is “a very personal process,” says Walker, but understanding who will be building your new home - laying the bricks, installing the lights - is vitally important. A project involving several contributors might allow for greater ‘specialisation’ in each area, for example, but can also run the very real risk of miscommunication and mismanagement. On the other hand, Walker says, a company that owns the entire project from start to finish has one very important benefit.
“A company that is responsible for every aspect of the experience – including design, sales, project management, service and construction – can help avoid the risk of a sunset clause being triggered,” he says. This involves cancellation of your contract based on the fact that the building hasn’t started in time – a very real risk when multiple suppliers are involved.
2. Ask for help to understand the space
One thing that you might find tricky about buying off the plan is imagining what your new property will look like. It can be hard to picture how much room you’ll have when you’re looking at a two-dimensional drawing, but some developers will go out of their way to help you get a feel for that space. Mirvac’s NSW Residential Settlement Manager, Kate Black, suggests you ask to see “a model that lights up for each apartment, so that you can clearly see where you are within the building, what amenities are at the base of and inside the building, and with electronic screens that show full detail.”
She also suggests looking for a display apartment, or at least display elements of the apartment, “so you can touch and feel your new home.”
3. Communication: it’s the key to happiness
The developer you choose should be able to give you a detailed outline of their communication process. And the communication shouldn’t stop after you’ve signed the contract. In fact, that’s when you should expect it to be gearing up, because nothing keeps you more excited and reassured about your new property than hearing updates on its progress. Black says there should be steps in place to make sure no communication slips through the cracks: “A construction update every three months is a good place to start, and then the communication will get more intense six to nine months out from completion so you have ample time to prepare for the settlement process.”
4. Look at a developer’s reputation
How do you know what the quality will be like, when the property hasn’t even been built yet? Well, the proof isn’t in the glossy brochure images – it’s in a developer’s reputation. “A developer needs to scrutinise everything, so that what is presented in the sales office is what is delivered,” Black says. Do your research on a developer that you’re considering purchasing with. Ask around about their previous customers’ experiences and go online to find out what others are saying before making your final decision. Visit their previous developments, so you can see bricks and mortar evidence of how their work stands the test of time.
5. Seek independent advice
It’s better to be safe than sorry, so it’s vital that you seek your own independent legal and financial advice before signing on the dotted line. The best places to turn to include a trusted conveyancer or property lawyer, as well as your accountant and/or your bank. Some of the biggest clauses to go over carefully with your advisers include the cooling-off period, the specific plans for the project, payment of the deposit, inclusions within the build, finance approval, how any defects will be handled, and warranty periods. Whether buying off the plan is a new experience or you’ve done it before, you want everything to go just right with your new property purchase. With a few simple steps, you can be confident you’ll be happy with your decision for years to come.