What is Off the Plan Apartment and Is It a Good Investment?
There are generally two types of buyers of property like single detached homes, apartments, condominiums, and/or townhouses. The first are people who really want a property to go home to, grow old in, and build dreams together with the family. These individuals require a home for the sake of life and their families. The other group of people are those who buy properties as investment opportunity. Like any trader, they want to buy low to sell high. And one of today’s hottest trends in the property market is purchasing off the plan apartments in the hope that it will generate substantial return of investment in the not-so-distant future.
First, it is important to clarify what off the plan or OTP apartment really is before you can start asking for tips for buying OTP apartments for investment.
As the term implies, an off the plan apartment is a type of property that is pretty much still in the drawing board. The real estate developer already has all of the pertinent documents necessary to construct and build the proposed apartment. They also already have the concrete plans and even the complete design of every model unit they are going to build. To put it in very simple words, an off the plan apartment is an apartment that is yet to be built.
How’s that possible? How can you purchase something that you cannot really see? Of course, you can say that the real estate developer has all the plans including a mock-up of their model units. But these are still pretty much not the real deal. These are just some of the major concerns of potential OTP apartment buyers. It is quite difficult to make a decision based on plans alone. The major issue is the what-if factor such as what if the developer does not fulfill the actual specifications of the apartment or what if the materials used were substandard? Conversely, if potential OTP apartment buyers don’t make the decision now, and the project becomes a big hit later on, then this becomes a missed opportunity.
There are a lot of what-ifs in purchasing an OTP apartment for investment purposes. Come to think of it, this is the very nature of investments. There are always risks involved.
To help you decide, here are some of the major reasons why you may want to buy an off the plan apartment and make it an investment.
- First, if you are going to buy early, you are guaranteed the lowest price. This is because the developer needs to turn in as much sales as possible to help meet the company’s financial requirements. Once their finances are in order, they will hike the prices substantially.
- Secondly, you are paying a property at current prices which, if economic conditions permit, will increase exponentially in the future. It’s buying today for tomorrow’s equity.
- Third, you will have plenty of breathing room for coming up with the finances to start paying for your OTP apartment. Sure you will pay a down payment but you won’t be paying anything else until the project has been completed.
- Fourth, you get to choose the best unit for yourself or for your investment; that is, if you are quick enough. You can pick the unit that provides the best view or any other characteristic that you know other people will also be interested in.
- Lastly, you get stamp duty concessions as well as other incentives from the government for buying a brand new apartment unit. Of course, different states and territories will have their respective policies regarding this but generally, you will enjoy some benefits for buying new.
With these benefits or advantages of buying an off the plan apartment, it sure looks like a very good investment.
Unfortunately, not everything is as rosy as it seems. As there are advantages, there can also be drawbacks in investing in an OTP apartment. These can include the following.
- It is difficult to make a very accurate prediction of how the market will look like 5 years from now. You may be expecting the market to grow but it could also go the other way. So, you will be stuck with your investment especially if you expect a quick ROI.
- The unit you received may not actually be what you had in mind.
To make a successful investment out of an OTP apartment, you need to do your research and study the contract very carefully. For the contract, you need to make sure it specifies a cooling off period, adequate plan disclosure, warranties and inclusions, management of defects, stamp duties, and expected completion of the project. You will also have to learn more about the developer or the builder and make sure that they have an excellent reputation in this business. Make sure as well that the developer will be providing you with a home warranty insurance coverage before affixing your signature in the contract.
Buying an off the plan apartment can be a sound investment. You can increase your chances of making it successful by carefully understanding the different factors that can affect its overall value over time. Please contact Chilli Realty on 03 9482 7440 to discuss about your property requirements.