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Are you considering buying an off-the-plan investment property? Perhaps you’ve done your research, and the one thing holding you back is tying up your savings in a deposit.
Let’s take a step back. Buying a home off-the-plan means signing a contract to buy a property that is yet to be built. When doing this, you can learn about the property developer, explore floor plates and plans, choose unique layouts, finishes and designs and renders for the property, but can’t view a physical building yet.
The property market has remained steady post COVID-19, and many property experts are saying that there has never been a better time to buy.
With that in mind, here’s our handy step-by-step guide on how to buy a property off-the-plan in Australia.
In most cases, there’s an expectation from financial institutions that you’ve saved 10% of the value of the home you are looking to purchase. Have you saved enough for a deposit of the purchase price or do you need to work out a savings plan?
Typically, buyers pay an initial 10% deposit, and the balance of funds aren’t due until construction is completed. Construction time varies, it could be only a few months or some years – with apartments taking an average of 20 months (give or take) to build. With Coposit, you don’t need the full 10% deposit, but we’ll get to that a little later.
Speak with a finance expert to determine how much you can borrow to finance your purchase.
This is the most exciting and somewhat overwhelming part of buying off-the-plan, choosing where you’re going to buy! There are so many things to consider that we can’t possibly get into them all, but start by looking at the location, the reputation of the developer and builder, rental returns if you’re an investor, layouts, amenities (if any) and the completion date.
Use this time to visit display suites, speak to Sales Agents and find out what options are available to you. Discuss layouts and customisation options, do your research into the location and lifestyle options close to the development, and delve into the sales data available to ensure you’re making a sound decision. What are the strata levies per quarter? Are the council fees high? Is there any infrastructure being built nearby that might affect the apartment? What are the views like? These are all critical things to find out.
When you finally find the apartment of your dreams, usually you’ll need to submit an Expression of Interest (EOI) form and pay a holding deposit. Each developer is different when it comes to this amount, some may only need $1,000, some may need $10,000.
Once you’ve selected your apartment of choice, to initially take the property off the market, all you need to do is complete an EOI form and pay a refundable holding deposit. From this day you have a few weeks to perform the steps below.
Now we get to the legal business! You’ll need to appoint a solicitor to purchase a property in Australia, and they will take care of receiving and checking the contract for sale. The developer will provide a contract to you, and before you sign the contract, your solicitor should review the contract terms and confirm that all compulsory disclosures are attached to the contract.
The disclosures in off-the-plan contracts usually include plans of the property and the strata scheme, a list of the property finishes and inclusions, the by-laws of the strata titles scheme and other strata agreements. From the issue date of the contract, you usually will have 14 days to exchange contracts and pay the balance of the deposit, which is where Coposit comes in.
There are grants available for first home owners, and for investors, as well as stamp duty savings may be the first draw card for many, however, there are other significant factors which greatly increase the appeal of off-the-plan property, particularly for investors with a ‘buy and hold’ strategy.
The developer may also offer special incentives like rental guarantees, cash rebates, free blinds etc. so be sure to ask!
If you haven’t already, now is the time to organise your finance with your financial institution or bank. Generally, you’ll need pre-approval of the amount you’re going to borrow.
You’re nearly there! Now’s the time to sign your contract with your solicitor.
Once you and your solicitor are satisfied with the terms of the contract, the developer will arrange for you to sign the contract (usually in duplicate). Once the contract is signed by both the buyer and the developer, it is exchanged and becomes legally binding.
Like with any property purchase, buyers need to pay a deposit upon signing the contract for an off-the-plan property with the balance due upon settlement, whenever that might occur.
With off-the-plan you generally need to pay a 10% deposit to secure your property, and then you have time (usually at least a year) before the balance is due. However, instead of tying up your savings or available cash flow with a deposit that can often be as much as $100,000, Coposit gives investors the option to hold onto their cash and instead buy with just a $10,000 deposit!
This allows you to secure a property with $10,000 (or you can choose to pay more to reduce your weekly payments) in savings, paying off the rest in weekly instalments called ‘coposits.’
At the time of signing the contract, the balance of your deposit is payable to the developer. Your holding deposit from earlier will be deducted from this amount.
In your relevant state, you’ll need to pay stamp duty on the purchase price, so do your research as to when this is payable and within what timeframe.
After the building is completed, the developer will then send a notice calling for settlement, which is at least a few weeks beforehand.
Once your apartment is complete, the developer will invite you to your pre-settlement inspection. The pre-settlement inspection provides you with the opportunity to not only inspect your future home or investment but to also identify any quality issues.
Once your property is settled, the developer will call you and set up a time to settle on your apartment. Off-the-plan properties don’t settle until the property you purchased has been built, meaning there could be quite a lengthy period of months or even years between paying the deposit and paying the full purchase amount.
Finally, the time has come to move in to your new home if you’re an owner occupier. If you’re an investor, the journey begins with locking in a property manager and leasing out your new property. Either way, you’ll now have your set of keys.
Saving a 10% deposit can take a lot of time, and delay people getting into the market. That’s where Coposit comes in.
Coposit, the innovative platform launched in 2021, has already caught the attention of nationwide residential developers and buyers alike by offering the opportunity to purchase a house with as little as $10,000 in savings.
There is more than just one way to buy property. If you’re ready to kick-off your search for your new home, download the Coposit app and start browsing from a range of projects where you can secure your home for as little as $10k upfront.
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