All Topics / Help Needed! / Buying off the plan

Viewing 19 posts - 1 through 19 (of 19 total)
  • Profile photo of baconbacon
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    @bacon
    Join Date: 2008
    Post Count: 46

    Anyone done this and had success? Failures?

    Thoughts over-all?

    Friend just bought one and was interested to see peoples thoughts here.

    Cheers

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
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    Generally its very risky and not for me personally.

    Pros:

    1. Buy at today's market rate (albeit some are over priced) 

    2. Secure a property tody but do not need to settle until later say 1 or 2 years until the the property is completed

    Cons:

    1. One firesale in the complex and the valuation of your purchase will come down at the time of settlement

    2. When valuation is done close to completion this could come back lower which means potential issues with settlement

    3. Strata starts off relatively low but will increase rapidly as its a new complex

    4. Don't know what type of finish you will get. The contract will have the actual finishes but doesn't show worksmanship

    Regards

    Shahin

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    Profile photo of RPIRPI
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    @rpi
    Join Date: 2012
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    We are doing  a lot of OTP contracts at present.  They are really aimed at protecting the seller.

    RPI | Certus Legal Group / PRO Town Planners
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    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
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    Again it comes down to doing your due diligence very carefully. 

    One advantage in Victoria is if you buy a property off the plan you are only charged stamp duty on the land component, so its possible that if you buy a $500,000 apartment you may only pay a few thousand dollars for stamp duty. Now if you buy anywhere else in Australia stamp duty is based on the contract price.

    The only other advantage is you buy the property at a good price, in many cases people over pay with off the plan.

    So all you really need to do is look at current sales and properties on the market and compare the prices. Personally if you are still unsure I would get a sworn bank valuation.

    Nigel Kibel | Property Know How
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    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    I've done it before and was lucky enough to rescind the contract.

    Think about the fact that it could hold you back from investing in the meantime because you will have it hanging over your head. worried that if you buy something now you may not have enough capacity for the finance for the one off the plan.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    I'm not a huge fan of off the plan.

    The single biggest issue in my mind is valuations not stacking up upon settlement – which can be a huge mess, particularly if the buyer has a small deposit.

    For investors, there can also be an opportunity cost because needing to settle on an off the plan property in the future may mean that they are unable to take advantage of other investment opportunities in the present (because it may effect their ability to finance the off the plan property at settlement).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of rob-warob-wa
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    @rob-wa
    Join Date: 2003
    Post Count: 36

    Not for me either.

    Same reasons as above;

    With finance committed for 1 or 2 years, to settlement date, doesn't allow for other projects to be considered.

    Also, I would insist on getting my own valuation OTP  done, before signing the COS.

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Only problem with arranging your own val is that it won't be considered by the lender – and because settlement is so far out, the market could change between exchange and settlement.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of rob-warob-wa
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    @rob-wa
    Join Date: 2003
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    That's fine , Jamie.

    But if you get your own valuation, you will discover if the developer has jacked the valuation up.

    And you can use yours to negotiate a better deal, if you want to continue with the purchase.

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Agree – it certainly doesn't hurt.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
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    The other thing is that investors don't realise is that in 10 years time it will be hard to differentiate the new property with one that is slightly older next door (say 13 years old).

    Regards

    Shahin

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    Profile photo of EmilEmil
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    @emil
    Join Date: 2012
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    Hi,

    There are several essential aspects you can’t neglect if you want to make buying off the plan a significantly more affordable alternative to buying already built property. First of all, the builder’s reputation is important. Choose a company with a solid track record in delivering on-time and on-budget projects. Pay attention to construction terms, deadlines, and overall speed of building. The schedule of finishes and a good defect clause are also things to consider when buying off the plan, in order to make sure that the builder didn’t implement cost-cutting procedures.

    Cheers,

    Emil

    Sunbuild Invest

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Hi Emil

    Must say – I haven't seen many OTP properties sell for significantly less than established properties of a similar nature.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
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    Schedule of finishes are one thing – workmanship is another. I have seen many OTP properties that have been quite poorly finished.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
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    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
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    The other thing you need to watch when buying off the plan is size. Most people have no ideas looking at plans to determine just how big an apartment is.

    So if a one bedroom is at least 50 square meters plus balcony thens its ok

    A two bedroom should be around 70 square meters plus balcony

    The reason I say plus balcony is because in some states they often include the balcony so it can make a big difference to the internal space.

    Nigel Kibel | Property Know How
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    Profile photo of jczjcz
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    @jcz
    Join Date: 2010
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    In a market like we have now, you are able to pick up a similar established property for much less than one that is OTP. However, not everyone has the financial capacity to come up with the initial 20% and stamp duties.

    Stamp duty may be seen as a worthwhile trade off when purchasing a well priced established property, but like others have said, you will need to do your due diligence. 

    Getting into the market is key, and we need to be mindful that not everyone is able to afford established properties. And down the track, our Asian counterparts will beat us to owning real estate in Australia.

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    jcz wrote:
    In a market like we have now, you are able to pick up a similar established property for much less than one that is OTP. However, not everyone has the financial capacity to come up with the initial 20% and stamp duties.

    .

    you don't need 20% to purchase a property – a 5% deposit can get it done for some.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
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    Perhaps you are referring to SMSF purchases? You only need approximately 8%-10% deposit for purchases.

    Regards

    Shahin 

    TheFinanceShop | Elite Property Finance
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    Profile photo of thebigothebigo
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    @thebigo
    Join Date: 2012
    Post Count: 26

    I've bought 2 OTP properties.

    6 weeks away from settlement of the first and the valuation came in 25k less than the contract price from 2010 (3 years ago).

    I have enough cash to cover this, plus i'd lose half of the first home buyers grant if i rescinded (around 9k), so i'm pressing forward but will certainly be more cautious moving forward and check out comparable area sales and get my own val done prior to commiting.

    FYI, my second property is a 1 bedder in South Yarra, i got it for 475k and already had an independant value done which came in at 505k. This is off the contract so there are variables but it's made my decision moving forward on the first property a bit easier as overall my portfolio is in the positive.

    Do your research, learn about the pros/cons and then act.

    I was green behind the ears and rushed in without learning and now i'm going to start 25k behind the 8-ball so to speak.

Viewing 19 posts - 1 through 19 (of 19 total)

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