Property investment: Buying a new house Off the plan
Ask investors what their first major investment was and most will say their first home. Whether it was a small detached home or an apartment, property investment is considered a safe bet when investing.
Thanks to the current market and Government incentives, more and more first time investors are looking at buying a new house straight from the drawing board.
‘Pro’s’ to buying a new house include:
1. First Home Buyers Grant: offering a cash incentive to individuals buying their first new home. The catch? That the landlord must live on the property for six months before renting it out. (Not that bad)!
2. Stamp Duty savings: Some states in Australia will reduce Stamp Duty when buying a home from the plan. So the savings can reach thousands! You will generally only pay stamp duty on the land component of the purchase. This can mean saving half or more of the stamp duty.
3. Builder’s Guarantee: Unlike buying an existing home and looking after the cost of renovations and structural faults yourself. Brand new property in Australia has a 7 year builder’s guarantee. So any structural damage in those initial years will be at the expense of the constructors.
On top of these small ‘perks’ buying a new house off the plan gives the buyer more choice in their property. With the intent of renting it out, colour and fixture choices can add significant rental interest to the home and you get these choices when buying from the drawing board.
Experts say, creating an environment that tenants can imagine themselves living in is the key. So although you may love a canary yellow wall with vintage lamps, chances are the majority of your rental market wont.
Keep paint and fixtures, neutral and modern and living spaces open.
So what research should before I buy Off the plan?
- Research into the area you are wanting to buy in as well as the prices of properties in that area and what they are renting for.
What are the market trends of that area over the last 15 years and where is it looking at heading in the future? Keep in mind that apartments go up in value quickly once they are finished and then will typically coast on an average price for a while before steadily increasing in value according to the market. It may be an option to consider putting the apartment straight on the market after completion for some quick cash.
2. Be aware and ready for a market crash or your own financial trouble.
In a circumstance where you end up bankrupt or the market suddenly crashes you need to have a plan in place on how you will rebuild. Try to not go over budget when building and keep your mortgage repayments manageable with financial room to support you should things get tight.
3. Get to know the history of your Developer/Builder.
Speaking to people who have worked with them before is best but if you can’t, get online and research the properties they have worked on in the past. Even go and see them if they are in the area.
4. Know what you are getting for your money.
See display homes or go and see paint colours and fixtures in the shop. You don’t want to be paying extra for things that you don’t like or won’t work. It can be hard to picture everything on paper.
Unlike an existing home, buying a new house gives you the chance to see your investment come into reality from nothing.
Be patient and enjoy the process.
Article by Jordan Cox and James Parnwell
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