Article: Brad Morgan, Rawson Developers
There are many benefits to buying off plan however I would say that the investment opportunity is what stands out for me, although there are a few other points which I will discuss.
Unparalleled investment opportunity:
You can purchase an off -plan apartment by putting down only 10% of the purchase price. The property’s value increases over the construction period and as soon as the building starts nearing completion the prices rise even more substantially, as potential buyers can now start seeing the finished product and thus demand for these almost completed units’ increase. With our three most recently completed developments, we have seen a capital gains average of around 45% (based on actual sales) with some increasing by as much as a staggering 85% over the construction phase.
For those speculators who sell their properties at this point, they would have made on average 450% on the 10% that they originally put down as a deposit.View Previous Developments Returns
Inflation works for you:
For those investors who keep their properties as investments and finance them via a bond, the rental income covers the majority of the monthly bond payments. Every year, together with inflation the rental income increases and before long the rental income exceeds the bond repayments and the tenant ends up buying the property for the investor. This combined with the initial capital growth over the construction phase, makes buying off plan a hard to beat investment.
Investing in property the right way is a sure-fire way to create a passive income and achieve financial independence.
- New developments usually have top notch security and concierge features.
- There are no transfer duties.
- There are a few amazing tax breaks when buying in new developments, in certain areas you can claim up to 55% of the purchase price as a tax deduction.
- Clients can choose their own finishes that suit their taste.
- Clients have a wide choice of layout options.
- Most new developments utilise green building techniques including power and water saving technologies
- Many new developments focus of lifestyle and include pools, gyms and social areas.
- Buildings include the latest technology such as fibre optics
- Low maintenance – because the developments are brand new and include the latest technologies such as central heat pumps, maintenance is unlikely and running costs are reduced.
The risks and considerations:
It is important to be aware of the risks involved when buying off-plan. Although the consumer is protected, you don’t want a lengthily and inconvenient experience, so it is important to be comfortable with the developer you are buying from. It is a good idea to invest in projects that are being developed by experienced developers and builders with a proven track record. You do not want to be inconvenienced or receive an inferior product because of the developer’s (or builder’s) lack of experience.
If you are bonding the property it is important to realise that interest rates may rise. It is a good idea, when purchasing the property to buy something that doesn’t stretch you too much, so that you will be able to afford the payments if interest rates do rise.
It is also important to realise that if you do not have a tenant for a month you will still need to make bond repayments so it is wise to have some savings to see you over periods like this. Location is important, so invest in areas with high rental demand where you are less likely to sit with an empty property. In areas where rental demand is high, you are also likely to get a higher capital growth.
The questions you need to ask your developer:
Experience and track record: Enquire about the developers’ track record and find out which are their most recent completed developments. It is advisable to go and view the building as well as the finishes to make sure you feel they are up to your standard.
It is also worthwhile knowing if they are using the same builder. It helps when a developer has a good relationship with a specific contractor.
Short term rentals: Sometimes short term rentals such as Airbnb can make your investment even more profitable and it’s important to know whether these are permitted.
What is included in the price: Make sure you are aware of all additional costs involved. Although there will be no transfer duties, sometimes you be liable for the transfer fees (attorney fees). There is normally a short period of time between completion and transfer where you may be liable for occupational rent. Be sure you are aware of this and although it can be partly offset by the interest earned on your deposit, make sure you have funds available so that it is not a nasty surprise.
What are rates and levies: Know what your monthly costs will be before you decide to proceed with any property purchase.
Is the final result always as beautiful as the pictures suggest?
Not in all cases. We have seen developers hand over units with very substandard finishes which is bound to leave the client very frustrated and disappointed.
We at Rawson Developers pride ourselves on our design concepts and finishes. “We love it when our clients are surprised that the unit they receive looks better than they could have imagined and everything has been thought of. This is where our in-house design team comes in – we try to create spaces with great flow and space utilization. Our team pushes the limits with each new build resulting in smart design that translates into even smarter spaces. Once the 3D renders are created, our on-site team builds with both the plans and the 3D renders to make sure we deliver what we promise. We also have extremely critical snag teams that go through each unit long before the handover to identify any possible snags that we can perfect before we hand over the units to our clients.” Says Brad Morgan
“Our business relies on repeat buyers as well as referrals and thus it’s imperative that we deliver phenomenal apartments and homes, offer exceptional service and create investments that deliver excellent growth and investment returns.” He adds.
What other advice would you give to someone buying off-plan?
If you are financing the property via a bond, then it is worth while making use of bond originators, who will be able to approach all the banks and get you the best deal for your individual circumstances and investment objectives.
Whether you rent your property out on a short or long term basis, consider professionally managing your investment property by using a property management company to take the stress out of finding the best qualified tenants and make the day to day running of the property as easy as possible.
Be aware that interest rates can rise and it is possible that property prices can fall. This is something that is out of the hands of the developer. Make sure you can maintain your payments and hold onto your property until things change should either of these occur.View Our Current Developments