Off The Plan. Pros And Cons

As a general rule, we don’t buy off the plan (OTP) property for our clients. However, there are some circumstances within which an off-the-plan purchase may fit. It really comes back to your property purchasing strategy. Are you buying for cash flow and depreciation? Or to be able to value add and for capital growth? Answering questions like these might be able to give you an answer as to whether or not off-the-plan purchases are right for you!

Let’s take a look at some of the pros and cons from both sides of the fence, shall we?

Advantages of buying Off The Plan

The main advantage to buying off the plan is that you agree upon a purchase price before the building is completed, and generally only need to offer a small deposit.

In theory, buying off the plan means that you could pay a lot less for a property now than what it may be worth by the time you move in, as property prices could increase significantly during the time it takes for the developer to build the home.

Some other advantages include; being able to utilize government grants, working in with the builder/developer to customize the property, long-term warranties and insurances in place, generally high rental returns, if moving in - enjoying a brand spanking new property!

Buying OTP also gives you a bit more time to get your finances in order, as you’ll generally only need to put down a 10% deposit to secure the contract, and can use the extended construction time to save up the outstanding balance. If you are an investor you will also have the added advantage of greater tax deductions through depreciation as everything is brand new. 

Disadvantages of buying Off The Plan

According to the contract, the builder is within their right to change fittings and fixtures to lesser quality products than what was initially specified, without letting you know. They can even reduce the overall size of the property by up to 10%! Oh, and we can’t forget to mention the ‘sunset clause’ in the contract too… If a settlement has not taken place by the end date included in the clause, both parties are legally entitled to walk away from the contract. Which takes away any certainty in the purchase from day one.

You could also be left in the lurch when the developer files for bankruptcy! This may affect the initial stages of the development and the property you have purchased never ends up being built. Or perhaps later stages of the development that were planned and would have added value to the property you purchased in stage 1. Instead, you’re now left surrounded by an empty building site instead of a completed project!

Don't even get us started on the unknown quality of build and immediate and ongoing defects...

Now we’re not here to tell you what to do with your life, but you know…. be cautious and considered when investing in property in general and make sure you know exactly what you’re getting into if you’re planning to purchase off the plan.

Good luck!