Buying a property ‘off-the-plan’ whether for investment or as an owner-occupier, means you commit to purchasing a property either before or during the construction phase. Buying off-the-plan is unfortunately sometimes portrayed as a ‘risky’ investment option due to the fact you are signing contracts without having a tangible product to purchase. The reality is that purchasing off-the-plan has significant benefits that deliver time and financial savings, in addition to actually de-risking the purchase.
Time To Plan and Save
As you are committing to property that may take 12-18 months to complete, it offers you plenty of time to plan. This is valuable if you plan to occupy your future home, leaving you plenty of time to organise the sale of your existing property, or end of lease. It also allows you to continue building up your cash funds, with many off-the-plan purchases requiring no progress payments with balance of contract price paid at settlement. This gives both homebuyers and investors the freedom to keep their funds working in other areas, while knowing they having safely locked in their purchase price. For example, all Buy Property Direct properties only require a 10% deposit with the balance on completion, so your money can still be working for you – paying down bad debt or helping pay down your principle place of residence.
Big Savings
Developers need to sell as many properties in the early stages to trigger their construction finance agreements. Therefore, getting in on a new development in its infancy can sometimes allow buyers to take advantage of early bird special discounts. Once construction commences, prices will commonly rise in latter stages to potentially provide capital growth from the beginning.
Good Today, Better Tomorrow
Purchasing an established home today and moving in three months later at settlement, won’t see you making much in the way of capital growth (unless you grabbed an amazing deal or the market has gone crazy). Purchasing a property off-the-plan and settling after construction 6-12 months later often pockets buyers instant capital growth.
Stamp Duty Savings
Great stamp duty savings are available on off-the-plan property, particularly in Victorian property where the duty is calculated on the land’s value at the time of purchase. The stamp duty payable rises throughout different stages of construction, so the sooner you purchase, the greater the savings (e.g.: as vacant land). In comparison, established properties offer no concession on stamp duty and is calculated at the full sale price. This is very useful for investors and first homebuyers who can acquire property with minimal cash deposit, as stamp duty dollars are typically not ‘loaned’ funds by the bank and must be provided by the buyer.
Beat The Tax Man
Off-the-plan purchases are extremely beneficial for investors looking to leverage the tax system to their advantage. Greater tax advantages apply to newer properties due to greater depreciation that is regarded as a legitimate non-cash expense of your investment ‘business’.
Peace of Mind
New properties come with a six-year structural warranty, giving buyers confidence over the maintenance costs likely to be incurred. Investors are legally protected on the building performance of their purchase, and will not need to continually spend cash on fixing small maintenance items, which is advantageous for ongoing cash flow particularly in the initial years after settlement. Further to this, brand new properties come with brand new appliances, which means a range of manufacturers warranties are in place for everyday items such as the stove and heating/cooling. This again provides less risk of ongoing costly maintenance on the property, which is usually an unknown quantity when buying an established home.
In Summary
As you can see, purchasing property off-the-plan offers an amazing range of benefits for all sorts of buyer types. All Buy Property Direct properties must meet our strict criteria. From strong demographics, to capital growth and rental yields, our team diligently researches every aspect of our developments to ensure you gain the maximum benefits from day one. At Buy Property Direct, we offer a complete suite of property investment services geared towards helping everyday people achieve financial freedom through property investment in Melbourne. Our entire team are passionate property people and will custom build a financial plan that offers you a brighter financial future.
To see how Buy Property Direct can help you take the first steps on the property investment ladder in Melbourne, or if you would like to build on an existing portfolio, contact us today.