All Topics / Creative Investing / Off the plan investments

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  • Profile photo of tartostartos
    Join Date: 2008
    Post Count: 1

    Has anyone had experience with buying off the plan where you don't have to settle for 2 years and also the developers promise a return in the first 12 months. i.e.

    Profile photo of sallyannsallyann
    Join Date: 2005
    Post Count: 53

    Your link didn't work for me but why would they need to promise a return? If it was a good investment it shouldn't need guarantees. Do your sums, look at what similar properties in the area rent for and the vacancy rate for the area, population growth rate etc. Also make sure you compare rents/vacancy rates for properties of similar floor area and facilities.

    There are some higher risks in off the plan – ie buying sight unseen, and not knowing if the price in the area would rise or fall over the two year period, and some contracts allow the seller to raise the price before settlement. But if you can afford some risk etc and the figures work, worth thinking about.

    Profile photo of Jon ChownJon Chown
    Join Date: 2007
    Post Count: 254

    In my opinion a Developer giving a rental guarantee for the first year is a positive  move.  Depending on the number of units in the development, it is often the case that at time of settlement there will be a short term glut of rental properties which will force the real rental value down in the short term.   After 12 months, there will only be spasmodic rentl units available and thus true rent can be achieved.


    Profile photo of ErikHErikH
    Join Date: 2007
    Post Count: 118

    We have several off-the-plan investments in our portfolio and they seem to be doing well, I paid 10% down and the properties have grown nicely in estimated value and sales prices so with a bit of luck I won't need to put in much more money at settlement (as overseas investors we pretty much limited to 80% LVR). If you can use a bank guarantee or deposit bond it can be even more attractive.

    Risks: you buy sight unseen so you need good plans and sketches and be able to translate that to and end product in your mind, you need a reliable builder who's going to deliver quality, on time, wihout major defects at settlement and doesn't go belly up before settlement. Suggest you visit previous project sites. Be careful with pricing as most off-the-plan I've seen is priced closer to the expected value in 2 years rather than the current market in which case you won't make any gains before settlement. Pay close attention to floor plans and differences in prices per unit to select the best value for money option.

    And remember, this is a contract of sale, so if you buy off-the-plan and the values go down that's your bad luck but you have to settle, although you could walk away and lose your deposit, but I have been told that there have been cases where builders/developpers sue clients who walked away from thier deposit – if that's true I don't know.

    Plenty of risk, but potential for good upside if you select carefully… good luck!

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