Investment Property Opportunities

Many investors who are looking for solid medium to long term returns are looking to the investment property market, a market that has historically provided excellent returns over time in both capital growth and rental returns.

For those thinking about a real estate investment, it’s important to undertake the necessary research.

If it’s an off plan property that you are considering, then that brings in to play a number of added factors to consider.

The purchasing process for an off the plan property – as well as the benefits for this type of property investment – can differ substantially from a traditional house or unit purchase, so it’s always important to have all the information that you need to make an informed choice about your investment.

Investing Off Plan – How Does It Work?

When you purchase a property “off plan” – which is more often an apartment or townhouse rather than a stand alone house – it means that you are actually committing to buy the property before it has been built.  Hence the term, buying “off plan” you are essentially buying based on the plans.

There are plenty of advantages in buying an off plan investment property – you are able to lock in at today’s prices, usually securing the property on a 10% deposit, with no more to pay until completion.  Then if it takes say 18 to 24 months to complete that gives you extra time to save more money and at the same time, if the market increases in value over that period, then you gain.

Your 10% deposit sits in a trust account, usually the vendors solicitors trust account – but you should check this in your contract.  So the money is quite securing, protected by Australia’s rigorous trust account laws and the funds are not available to the developer until the property completes.

For local investors they sometimes have the option of exchanging contracts using a deposit bond, rather than the 10% cash or investors will also usually have the option of exchanging using a bank guarantee for the 10% deposit.

There are plenty of advantages in purchasing an investment property off plan!

Buying off plan is a very popular way of securing a property and is often favoured by those who are investing from out of state or off shore non resident investors.

Sydney, Melbourne & Brisbane are particularly popular due to their strong population growth and employment hubs.  As such, many people who are living in these locations are looking for quality property that is close to the CBD, close to transport links and close to lifestyle amenities, shops, restaurants, cafes etc.

It’s many of these off plan properties that are typically located in these areas, areas that are often transforming inner city locations as old industry moves further out of the city and is replaced by new quality residential and commercial.

These new properties, in both established and renewal locations are in high demand by young professionals who want to live close to work.  Some will buy and this demand will push up values, others will choose to rent and likewise, the solid demand for these well located properties will push up rentals.

From the investors point of view, the other positive factor is that these new properties are very low maintenance.

Why invest in off the plan property?

There are several benefits often associated with investing in off the plan property.

When new properties are first launched, developers are often keen to get sales moving, so prices will be at their minimum.  Once the sales start to pick up and assuming that the general property market is on the move, the developer will often increase prices.  But those who have already signed their contracts – exchanged contracts – have locked in the initial price.

Investors will also find that off plan apartments are generally better designed that older apartments and investors have a choice of floor plans, choice of layout and often a choice of finishes, so a lot more flexibility than you have when you are buying an established property.

In some states, you may also find that purchasing new off the plan property can allow you to make a considerable saving on stamp duty – particularly if you buy before construction begins. However, stamp duty rules can change frequently and can vary considerably from state to state, so best to check out this situation at the time that you are purchasing.

From a tax point of view, investors will find that there are more tax deductions on a newly built property, as it is being bought new, investors can claim all of the depreciation and this often large tax deduction can mean a big benefit for an investors cash flow, meaning that it may cost far less to hold on to the property – once rental income and tax deductions are taken in to account, as compared to the investor buying a similar priced older established property – where much of the depreciation has been used up.

You can check out some of our current off plan investment properties in Brisbane and Melbourne