If you keep a keen eye on the property market, you’ll no doubt know the term “off the plan” (OTP) investment property. Essentially, you are entering into a contract to purchase an property before, or while construction of the property is taking place. While there are significant benefits to buying off-the-plan, there are also pitfalls that you must consider before committing to that contract.
Be aware of the differences in contract details and settlement time frames for an off-the-plan property. It’s important to understand that OTP contract details are extremely thorough, as construction will be an ongoing process. The contract will need to include proposed body corporate assets, expenses, as well as a detailed schedule of finishes for each property.
Investment Property Market value decline
In today’s volatile property market, there is a risk that you could be paying too much for your investment on an off-the-plan deal. For instance, the market value may drop over the course of the property’s construction, resulting in the actual worth being less than predicted, though we are presently seeing a possible upswing in the market.
Avoid stifling contracts
Many builders enforce rules that prevent you from seeing the investment property until construction has been fully completed. Your visual prediction of your future property may not live up to the standards that these builders actually deliver. Remember to check the finer details of the contract to avoid builders that subscribe to these rules.
These are always worth considering. Interest rates could potentially rise before you have even settled on the investment property, and can cause problems if you wanted to fix the term of the loan at the current interest rate. Try our loan comparison calculator to compare current and potential future interest rates.
It happens time and time again – developers diving straight into liquidation before a project has been completed. Ask what your options are if this occurs. Ensure you know exactly what happens to your money, and clarify the extent of your guarantees.
The bottom line
Read your contracts, and ask plenty of questions. Better yet, get a lawyer to read your contracts for you to assess any possible grey areas or discrepancies that may affect you in the long run. Remember that these are lengthy ongoing contracts, so you have to be absolutely prepared. – and patient. If you have any queries about an off-the plan investment property, please don’t hesitate to drop us a line.