10 Jun 8 things to check when buying “off the plan”
Buyers can get some great deals when buying off the plan. The developer and property managers understand buyers are taking a slightly higher risk to buy property that is not built yet. Also the developer needs the sales to satisfy their development finance and so they will often sell the apartments at a slight discount. Buyers can also enjoy capital gain over the 12 or 18 months construction period before they have to settle (pay the full price)
But buying off the plan also has its pit falls. As property managers we have seen most of them. So here are what a buyer should pay close attention to.
It’s the golden rule of all real estate so it’s no surprise it tops our list here. The question to ask is “In 7 years’ time what is this specific location going to be like as a place to live?” Even for investors, buy a property that is a great place to live so it stays well leased to good tenants and be a property manager’s dream. Think about all the things an apartment owner will need…. Train / Tram, parks, cafes/bars/restaurants, good local shops, child care, schools, proximity to employment, etc. Even if it is the CBD area, like all cities around the world some spots are better than others
Who is the developer? Your main concern here is that the property you select and pay a deposit on is going to be built to a quality standard and still look good well into the future.
So ask the developer or their selling agent …What projects have they done before? What was the quality like? Did they stand the test of time? Who are the partners in this project? What ever you can find out to give you comfort that the project is of a high quality.
- Interior design and Finishes
Look very closely at what the quality of finishes are. Often a project has a couple of options for you to choose. It’s too late when you walk in to the finished apartment and it’s not what you imagined you were getting. You also want finishes that will appeal broadly to most tenants, make it light and withstand tenants ware and tear. A good property manager can help advise you on this.
- Don’t assume anything.
All commercial dealings need some element of good will, but ask all the simple or obvious questions and especially get anything that is important in writing. Find out about the finishes and features in the common areas, especially the entrance lobby.
The geographic aspect is very important and should be considered in concert with the city it is in. Most people will consider which direction is the best view but it is equally important to understand where the sun rises and falls and where and when it will get the most light. Especially in slightly cooler cities like Melbourne the light and warmth in an apartment from the sun in winter make a huge difference. Think about the configuration of the apartment and how it is designed to get natural light into the right rooms at the right time of day. Remember the difference between the northern and southern hemispheres.
- Car parking
A car park is not a car park. It can range from a single basement space accessed via ramp to a car stacker that holds 8 or 12 cars or a basement car space accessed via a car lift that you drive in to and press your level. Car stackers and lifts are quite common across the world now and there is no problem with any of these options. The point it just ask the specific question and understand exactly what you are getting so you can fairly compare different options.
- Annual fees and charges
In almost all instances residential tenants just pay their rent plus consumable costs like water, power, gas etc. These leaves the owner with all the other costs which can add up. This is just a normal part of owning investment real estate but you should understand how much they are (off the plan sales will be an estimate only until the project is up and running) so there are no surprises. The main cost items include
- Acquisition costs (legals, finance, stamp duty)
- Owners Corporation fees
- Property Management and leasing fees.
- All the little things
You can spend a lot of money on all the little things that are not included in a new property that you don’t even think about. Here are a few of them
- Internet connection
- Fly wire screens
- Curtains / Blinds
- Putting in a tap on the balcony to water plants.
- Changing the wardrobe design to better utilise the space
- Putting in more down lights
- Putting in more kitchen or bathroom cupboards