The Ultimate Guide to Buying Off the Plan
Buying off the plan is a great option for people looking to get a foot on the property ladder and start the next stage in their life. By reading this ultimate guide to buying a new property, you will be much more informed and savvy about planning to buy off the plan (OTP).
1. Research the market
Whether you’re looking as an owner-occupier or investor, location is one of your most important considerations. It’s important to understand where an OTP(Off the Plan) project is located with relation to transport infrastructure like freeway access; educational institutions; train, tram and bus stops, and amenities including shopping and cafes.
Consider the location related to your preferences: if you want tranquility, a property in a busy street or precinct may not be suitable. Likewise, if you are after a family home, preference properties close to educational institutions.
For Owner-Occupiers: You will be living in this property and you need to be sure that the location of the project will give you what you want: whether that is tree-lined tranquillity or connection to the vibrancy of Melbourne food and shopping areas.
For Investors: Consider proximity to educational institutions and public transport links as a way to minimise vacancy and maximise returns. Also consider housing density (the more apartments there are in the immeidate area the more competition there is when renting it out or selling)
1b. Choosing your property type
There are advantages and disadvantages to every property type – it is important to be aware of these to make an informed choice.
If you’re comparing a boutique apartment development, townhouses and a large scale project, it is important to be aware of upkeep costs, body corporate and liveability differences between these three.
Don’t underestimate the value an apartment can deliver in letting you access prestige, high-value areas without the price tag of a house or townhouse.
You can find out more on the House, Townhouse or Apartment comparison post.
1c. High density Vs Low density developments
Consider if you will purchase in a high density area or development or a low density area.
A High density area is an area where there is a large buildup of several apartment towers each with over 100 residents. Generally high density areas are clustered around activity centres so they do have direct access to shops and restaurants and transportation. This convenience however also comes with the hustle and bustle of the area, consider for yourself if you really want to live in such close proximity to bars and restaurants that may operate throughout the night.
Low Density areas and developments often have under 50 apartments in the building and although not directly in the high density zone they are still close enough that an activity centre can be easily accessed
If you are an investor considering High density vs Low density, think of supply and demand. in high density areas supply of apartments can more often outweighs demands. Consider you have an apartment in a tower with 100 other apartments, when you are trying to rent your property you will be competing against 50+ other owners trying to rent, this will put downward pressure on rental prices as everyone wants theirs rented first. When you are selling, likewise you will likely be also competing against a high number of owners in the building also looking to sell. A final thing to consider is that if you purchase in a high density area you are not just competing against the 100+ owners in your building, in all likelihood you will be surrounded by several towers each with 100+ "competitors" competing with you to rent and sell your property.
Read more visit High Density Vs Low density areas.
Once you’ve gotten an idea of what is available on the market and what you’re looking for, it’s time to figure out what developers you will contact. If you don’t work in the sector, you may never have heard of any property developers, if this is the case: don’t stress!
When looking at developers, look at how many projects they are selling, where they have worked in the past and how long they have been around for. This will give you an idea of their experience and reliability.
If you come across a an inexperienced developer always approach with caution as they may not have the experience to deliver to the quality you would expect or the project may even be derailed and cancelled due to their lack of experience.
2. Choosing your property
This is a key consideration for OTP buyers, ask your developer about the planned timeline of the project and the timelines of their other projects. Typical project development timelines vary based on size but can range from 12-24 months.
For everyone: When comparing boutique developments and large scale developments, it is important to remember that the larger a development is – the more potential complications and delays there may be.
2b. Design & Sizing
An important consideration for most people is the size of the apartment. Despite size being an important factor, it is equally important to be aware that size is not everything. A well-designed apartment with good lighting and good ventilation that is 60 square metres will feel much bigger and more liveable than a badly designed 80+ square metre apartment.
For everyone: When getting acquainted with the design of an apartment, it is best to visit display suites and offices in order to have an employee walk you through floor plans and finishes in person.
2c. Aspect & Configuration
Melbourne is luminous all year round with mild winters and warm summers. This great climate allows you to be more flexible with aspect of your OTP property – there will be differences in light exposure but you will rarely be in the dark (apart from at night!).
The configuration of your property is vital; make sure your developer has worked with architects to assure a light drenched interior that will remain well-ventilated, functional and liveable.
3. Decision made
3a. Contract signing
Once you’ve found your perfect OTP property, you’ll sign a contract and pay typically a 10% deposit within 7 days to reserve your dream purchase.
For Everyone: When looking for a lawyer/broker/conveyancer to help you through this process, make sure to choose someone who understands the nature of OTP development and contracts. If your advisor is not familiar with OTP developments they may not fully understand the complexities of an OTP contract.
3b. Before Settlement
Your developer and/or agency will keep you updated through the development process but particularly as settlement date approaches.
Approximately 3 months before settlement, the developer will notify you. This is the period when your mortgage broker and conveyancer will get busy finalising all details of financing.
When you complete your walk-through of the property prior to settlement, make sure to note all issues and problems and discuss them with the developer – this walk-through is similar to a ‘rental inspection’ prior to renting where you can walk through the property and highlight any issues.
For everyone: Highlighting issues and communicating clearly with your developer and builder is important. Make sure the builder and developer are aware of any issues so they are able to resolve them with maximum efficiency and minimum delay.
On the settlement date your bank and the developer’s bank will book in settlement for a day when remaining funds are paid to the developer and ownership will be transferred to you and you can move into your new property.
Disclaimer: The information published on this website are of a general nature only and does not consider your personal objectives, financial situation or particular needs and should be constituted as financial or legal advise. We make no warranty as to the accuracy, completeness or reliability of the information, nor do we accept any liability or responsibility arising in any way from omissions or errors contained in the content. We strongly recommend that you obtain independent advice before you act on the content.