What you really need to know about buying off the plan

Buying off the plan has recently had some bad press, with many labelling it 'risky'. It's unfortunate because buying off the plan can provide an affordable option to clients who want a brand new home. It does require extra scrutiny but buying off the plan can absolutely pay off.

If you have clients interested in purchasing a new property, without the hassle of managing the build, here's what they need to know.

Big four benefits

1. A property can be secured with just a 10% deposit and home loan pre-approval. This gives clients more time to pay the remaining deposit balance which won't be required until settlement. This additional saving time can also mean lower home loan amounts.

2. With the government keen to boost the construction industry, your clients may also be eligible to receive grants or reductions on stamp duty. These benefits differ between states and individual circumstances but I can provide detail for individual eligibility.

3. During the period between paying a deposit and settlement, buyers can benefit from capital growth without paying interest. Of course this can go both ways if the market takes a backwards turn.

4. A brand new property means buyers can make the most of depreciation tax with minimal maintenance costs.

How to reduce risk

Without a physical property to inspect at time of purchase it's important to minimise risk through research and precautions. Here are my top tips when buying off the plan for you to share with clients:

  • Be very clear on the specific fixtures, materials and fittings, including details such as brands and warranties, and ensure they're listed in the contract.
  • Ask if there is opportunity to customise. This may be a way to create a more suitable home or, for investors, a more attractive property to rent.
  • Consult a mortgage broker early on. Interest rates may rise during construction so it's important to understand how changes can impact repayments and what's affordable under different conditions.
  • Research the developer, architect and construction company. You want professionals who have a proven record of delivering a high standard of work and to schedule. Ask them directly for details but also visit completed projects to get an idea of their quality. Check their reputation by searching for reviews and resident feedback online.
  • Have a legal professional review and talk you through the contract before signing.
  • Inspect the property thoroughly prior to settlement. It's best to prepare a checklist to ensure you're thorough and not distracted by the excitement of your new home.