Before you buy an off the plan apartment, there's a few things you should consider.
It seems like every street you turn down these days, there’s an apartment building being built. As the apartment boom continues, more and more Australian’s are buying these new apartments – in most cases before they’ve even been built.
It’s not uncommon for apartment buyers to make their purchase having only seen some glossy images or walking through a purpose built display suite in the middle of an empty block of land where the apartment will eventually be built.
There’s nothing wrong with buying this way, 10’s of thousands of people have done it over the last few years around Melbourne.
But buying an off the plan apartment raises lots of questions for buyers – not just for first timers but also experienced home owners and investors who know what to look out for.
I put this guide together so you can make the decision safely and avoid any unnecessary stress.
Get your finance right
Before you start your off the plan apartment search, you need to speak to your Bank Manager or Mortgage Broker. If you don’t have one, ask friends or family who’ve recently purchased a property or throw it out to your social media network and ask them for some recommendations.
Some banks are stricter than others with off the plan purchases, so a good mortgage broker will be able to steer you in the right direction and help you navigate through the sea of finance options.
You need to know how much deposit you’ll require for the off the plan purchase and most importantly, the amount of money they will lend you.
IMPORTANT NOTE: Don’t over commit yourself. Work out what you can comfortably afford as a monthly mortgage repayment and stick to it. Be mindful of other property related expenses you’ll have like maintenance and Owners Corporation fee’s.
Picking the right apartment
Buying ‘off the plan’ will literally mean what it suggests, you’ll be making your purchase based on the floorplans and images provided to you by the selling agent.
In some cases there might be a display suit with a kitchen and bathroom set up so show you what the finishes will be like and some developers are even using 3D goggles to let you ‘walk through’ the apartment you’re interested in.
Whichever way you buy the property, you need to find the right property for you.
Are you buying the apartment to live in? Or is it an investment property? Depending on why you’re buying the property will determine what you should be looking for.
Owner Occupier: If you plan on living in the apartment, the property will need to suit your personal needs. How many bedrooms do you need? How many bathrooms? Do you want a particular view? Big balcony? Swimming Pool? Sauna? Etc… The options are only bound by your budget.
I recommend writing out a list of all the things you’d like and sort them from most important to least important. There are lots of apartments on offer and knowing what you want will really help you narrow down your search.
Investment Property: What’s going to make your property appealing to potential tenants and eventually potential buyers? The goal of any investment property is to give you a good rental return and increase in value over time.
Look for suburbs with high rental demand, close to shops, public transport, beaches and parks.
Building features can also be quite appealing to potential tenants and buyers but they come at a cost. You’ll pay a premium for apartment buildings with swimming pools, gardens, gyms, cinemas etc. and the ongoing Owners Corporation fee’s will also be more expensive than properties without those amenities. My recommendation is to prioritise living space over building amenities. As appealing as swimming pools and gyms are, making sure that potential tenants can comfortably live inside the apartment is more important.
Finding an off the plan apartment
Like most things we purchase these days, start your search online.
Once you shortlist a few developments that you think will be suitable, do a drive by of the site and see what the area has to offer. The street and general location will give you an idea of the neighbourhood.
If there’s a display suite, make sure you inspect it and check out the proposed finishes that are being offered. When you’re speaking to the developer or their agent, make sure to ask for some examples of their previous developments. It’s worth looking at those to see the quality they produce and also researching the developments and builders online to see any transactions that have occurred since built.
Making changes to the apartment
Depending on the developer and how early you enter into your purchase, there may be some scope for you to make a few changes in the apartment. Some developers may even ofter a small level of customisation at the time of purchase – I’ve seen some offer different floor colours and kitchen cabinetry finishes.
If you want something more tailored to your taste, make sure you ask the agent as early as possible – just be prepared to pay a little more for anything you specifically want.
There are also many cases recently, where a buyer purchases two neighbouring apartments off the plan and has the opportunity to work with architects to combine them and create a tailored floorplan to make the best use of the new space.
Check the paperwork, twice.
Never buy a property without getting independent legal advice. Every apartment and every development is different and so are each of the contracts. Find a lawyer or conveyancer experienced in off the plan purchases who’ll assess the contract, making sure that you’re protected from the development not completing by a certain date (sunset clause), not being completed as per your specifications or the developer or builder going bust.
Don’t skimp on getting the right legal advice. Saving a few hundred dollars for an inexperienced solicitor could end up costing you thousands upon thousands of dollars down the track.
Buying your ‘off the plan’ apartment
Once you’ve found your perfect apartment, you’ll need to put down a security deposit. If you’re not 100% sure if you want to proceed, find out if the deposit is refundable and if it is, when you need to confirm your offer.
To confirm your offer, you’ll complete a contract of sale and will need to put down a full deposit, this is usually 10% but varies from development to development. The remaining 90% will be due once the apartment is built and ready for you to move in to.
Before you settle on the apartment, make sure you do a thorough inspection. Point out any defects or damages to the developer so that they can organise the necessary repairs. Don’t stress if there are some issues, this is quite normal – just make sure the developer is ready to fix it.
