If you're considering buying off the plan, you're going to want to avoid these pitfalls...
Thinking of getting a great deal on a new off-the-plan apartment?
In a booming market you have the potential to realise a tidy profit and take advantage of the tax depreciation benefits. But before you get too excited be aware of the potential pitfalls before you sign a contract and pay up.
The major drawback of buying off-the-plan is that you can’t walk around an off-the-plan apartment - it isn’t built yet. The closest you get is a set of plans, glossy brochure or maybe a show apartment that may look similar.
It takes a significant leap of faith to invest in a concept, so it makes sense to avoid some of the most common mistakes newbie investors make. Such as...
Not getting legal advice
An off-the-plan contract of sale is different to a normal contract of sale, so you should ideally get advice from a property lawyer. Like any legally binding document, the devil is in the detail and you need to know what you are signing up for. Is there a get-out clause if you change your mind and want to pull out? In some instances a contract could even stipulate that the developer can vary the design of the property without your approval.
The developer has gone bust
Not every property developer is the same, you should check their track record. Do they have a track record of delivering projects on time? Are the builders they hire reputable? Online forums are a great way of getting the low down from buyers. You can also check if builders have the appropriate licences online, and it’s worth taking a look at any previously completed developments.
Not knowing the local market
If your off-the-plan purchase is an investment property, you need to be sure that there will be demand from tenants. An oversupply of other developments in the area may force you to lower your rent and could even depreciate your property. Find out what other apartments are planned for the local area, what price points the units will be sold at and what they will potentially rent for.
I didn't order that carpet!
Your heart will sink if you walk into your new apartment and the finishes are not what you expect. The most common elements that disappoint include kitchen appliances, tiling, flooring and colour schemes. Your contract with the developer is your best friend – check if they are allowed to substitute fittings or brands and be clear about what you are getting.
Like any other investment, you need to do your homework to be sure that buying off-the-plan is right for you.If you want to learn more about investing in property, our Is an investment property a good investment? article has some pointers to help you make up your mind.