This has led to a situation where developers have sold most of their stock and have commenced construction on new buildings.
Unlike individual houses or townhouses which would take only months to complete, a large residential tower in the CBD could take up to 2-3 years to complete. Buying early into one of these developments when it is only a set of plans and a contract is where the process of “BUYING OFF THE PLAN” comes from.
There is no finished product for buyers to view so it’s a little complex and some clear guidelines should be set up to guide you through the process to a successful conclusion.
Lets look at 6 benefits for
“BUYING OFF THE PLAN”
1, Better Choice, When a developer first releases a large CBD tower like “The Lenz” which is Gwelo’s latest tower in the CBD, the banks need some pre sales to gauge the buyer’s acceptance of the new structure.
To attract initial buyer interest in the building, the developer will quite often offer a presale (discounted) price initially to early buyers to gain enough pre sales to satisfy not only themselves, but also the banks that the building will be a commercial success.
“So benefit 1- you save money if you buy early in an off the plan development.”
2, More Choice, Many buyers I know and work with (including myself) like to get into this stage early as not only do we get a discount, but we also get choice.
If you’re early enough, the whole building is for sale and you have a huge choice of different designs and layouts to choose from, different views and different levels.
“So benefit 2- you have “more to choose from.”
3, Secure the property at today’s price, Anyone who has lived in Darwin for more than 5 years would know that we are a fairly unique market place with strong economic drivers shaping our economy and driving our property market forward.
With Inpex, the marine supply base, new ports, new goal, airports and major shopping Centre’s and many more multimillion dollar contracts going to local contractors, we can, with some certainty, hope that past price rises in Darwin will continue into the future as well.
“SO BUYING OFF THE PLAN” property could gain you some built in capital growth. If you purchased off the plan 2-3 years ago in Darwin, the chances are your value would have increased over the 2-3 years construction period. So by locking in a price today, your property may go up in value over construction.
“So benefit 3- you may pay today’s price but in Darwin’s rising market it may be worth more at settlement.”
4,Time, Another advantage for first home buyers and investors is that buying off the plan gives you up to 2 years over the construction period to get your savings in order.
You could save a bigger deposit in the 2-year construction phase if you’re a first timer or an investor.
Get your affairs in order without rushing, as you would with a ‘normal’ buy.
“So benefit 4- Time is on your side to plan and save.”
5, Low initial outlay, Unlike a normal purchase, buying of the plan allows you several options in paying the 10% deposit required to secure your purchase.
Option 1 – Using equity in your home to fund the 10% deposit on your new purchase.
Almost all the banks will allow you to use the equity in your existing home to cover the 10% on your off the plan purchase. At Gwelo, we then put that deposit into an interest bearing bank account and you (the purchaser) receive all the interest earned during the construction phase, which could amount to many thousands of dollars.
Option 2 – Bank guarantee as your deposit.
If you have equity in your existing home, many banks will let you organise a bank guarantee which means the bank will send a letter to the developer stating that you (the purchaser) are backed by the bank as a good investment, and essentially “good” for the deposit at settlement for the OFF THE PLAN property.
Only the bank costs for setting up the guarantee and this is payable up front. The deposit isn’t paid until completion of the project.
“So benefit 5- Flexible terms for the deposit. You have time and options with the bank is on your side.”
6, Tax advantages, The Australian Tax system allows us to claim several depreciation items on new properties. The main deductions for tax are;
- Bank interest
- Strata costs
- Building costs
- Fit out costs
- Bank set up costs
These deductions are maximised based on how new the building is.
“So benefit 6- Tax advantages = money in your pocket.”
If you would like to find out more about buying of the plan or what current and future Gwelo Development opportunities are available, phone Simon Connelly on 0411 210 744 to book a free consultation or a seat in our next free Y Darwin Investment Seminar where we provide the most comprehensive look at Darwin, the NT and the do’s and don’ts of property investing.
I hope to meet you soon.
All the best.