WHAT TO CONSIDER WHEN BUYING OFF THE PLAN

At Blue Key Finance we are helping more borrowers today obtain finance for off-the-plan real estate than ever before. We'd like to inform you of what to be aware of when buying a property sight unseen.

There are a couple of dangers with buying off the plan. Firstly, you'd hope that the property you see on a plan will eventuate exactly as specified and within a certain time. For a small cost, we strongly recommend you utilise the services of Archicentre, the building advisory service of the Royal Australian Institute of Architects, which provides advice on plans. Their reports will express their opinion on whether the rooms are of reasonable size, the quality of the fixtures and fittings and the layout.

When the building is completed and just before settlement, Archicentre can conduct a practical completion inspection, including checks of the area of the building against the plans, confirmation that the promised fixtures and fittings have been included, and comments on its overall standard.

Time and time again we recommend only buy from developers with a good reputation and whose work you can see. Make sure every detail is specified in the contract, including fixtures and fittings - for example, not just a stainless steel oven, but a particular brand and model.

The second danger relates to price. It's always best to buy an off-the-plan when you know by the time it settles, property prices will rise. With investments, be careful of rental guarantees, as these can be used to set artificially high prices. For example, if gross rental returns are 10% in an area and the vendor guarantees a $400 a week rental, then that would price a property at $208,000. But say that market rent is really $350 a week, then the market value is only worth $182,000. You would therefore be paying over 12.50% above market. The vendor only has to pay $5,200 to guarantee the extra rental of $50 a week for two years but score an extra $26,000.

Please also note that the fundamentals of paying more for an off-the-plan property at settlement than you could hope to attain in the prevailing market would primarily be due to an oversupply within that area which will drive down prices.