10 Top Tips For Off-The-Plan Property Investments
New property investors are often intimidated by the process of buying an investment property “off-the-plan”, however knowledge is a powerful tool in that not only can it help you navigate the purchasing process, it will help alleviate the apprehension that often comes with trying something new.
An off-the-plan strategy is a great way to buy a property at today’s value, without a huge outlay of cash. Use the following tips as a guideline when purchasing your first (or next) off-the-plan property:
Grasp a thorough understanding of the market cycle and its ability to grow by considering the six market drivers – infrastructure, yield variation, supply and demand, population, economics and demographics.
Go after low density, boutique properties because:
- High density buildings are harder to get financed
- Profits will be greater in structures with fewer than 40 units
Buy ONLY in Stage 1 of a development. This is where you’ll get the best price for the investment property – buy later and you’ll reduce your profits significantly.
Don’t count on the agent’s idea of the property’s value. Get a “valuation summation” done at the commencement of the contract; not later in the process. The value will include the cost of the land and the building.
Buy below $600,000 because of the wider appeal in the marketplace – just in case you decide to sell. The “meat and potatoes” range of around $200,000 to $500,000 is where you want to be.
ALWAYS be prepared to settle after completion. Don’t sell half-way through construction. Have your financing arranged before entering into the contract.
We recommend that you purchase an off-the-plan under a 12 to 18 month contract. Since you’ll only have a deposit into the deal and the property value should rise, you should be able to secure a 100% cash-on-cash return.
Don’t miss out on opportunities because your deposit is tied up in a deal with a long settlement date. Plan ahead and make certain you won’t need your deposit to fund any great opportunities which might come along while you’re waiting for settlement.
To obtain funding for their projects, developers are required to pre-sell a certain number of properties. This fact can benefit you as a buyer because you can ask for additional and/or better inclusions as part of the process – this will help differentiate your property from others in the development; a difference which just may have a favourable impact on your rental yield!
Timing is important. Buy an off-the-plan property in a market which is set for growth, so that while you’re waiting the 12 to 18 months for settlement, your property can increase in value without your having to cash flow it from your back pocket!
This short checklist only covers a small portion of the things every property investor should know about buying an off-the-plan property. To find out more about this and other property investment strategies, come along to our next Property Investor Night.
There’s no obligation to attend – just simply register [here] and we will get in touch with you. At the event, you’ll get the opportunity to meet with like-minded individuals, pick up great tips and strategies from seasoned property investors who all share your passion for property investing and you’ll receive a free property investor’s toolkit – chock full of great content designed to help get you off to a nice running start!
Hey there, do you enjoy the Positive Real Estate Blog? If you did, why don’t you book into a Property Information Night in your area and get more information from our team. You can do so here.
Also, if you can not wait, click here to access the Property Mini Course and signup for our email newsletter. This FREE 2 hours video series gives you some of the top tips from our team that you can use right now. Thanks.
Take the Next Step
You won’t get very far as an investor without...
Which Property Investment Strategies Will Make...
Starting your property investment journey can...