"STOP! Some people buy strata units 'off-the-plan' - that is, they buy them from the architect's plan before they're even built. There are a number of special points you should be aware of in relation to buying this way as it's not as straight forward as it appears. Here's a brief guide on what to look out for plus a few links to some other information resources that may assist if you plan to heap down this sometimes 'bumpy' road."
When purchasing a strata property 'off-the-plan' (that is, you buy it before the building has been completed) there are a number of things you need to find out and do.
Here's a list of the main ones:
- Find out, from the real estate marketing company (or the developer if possible), about the estimated completion date and if that date is still realistic
- Obtain as much information as you can regarding specific details of included fixtures & fittings in the unit and those in any recreation areas such as the gym room, sauna, etc.
- Carefully inspect the display unit taking particular note of the level of quality and inclusions
- Carefully examine the floor plan making special note of whether it has suitable living areas, balcony areas and room location.
- If you plan to live in the property, will the layout suit your lifestyle?
- Again, if you plan to live in the property, will your furniture fit appropriately in the style of the property?
- If the property is for investment, will the layout suit your prospective tenants?
Generally speaking, if you would be happy living in it then most tenants would too.
- What are the proposed levies? Do they seem to low? or too high?
- Is it anticipated the levies will increase by the time the building is completed?
To be on the safe side it might be wise to budget for an increase no matter what the answer.
- How much variation in the size of the unit (as shown on the plan compared to the final size) has the vendor nominated in the Contract for Sale? (e.g. The floor plan may show a total unit area of 110m2 but the final size is only 98m2)
- Is any such variation acceptable to you?
- Are there any proposed restrictions on the use of any proposed facilities?
- Are there any other special conditions planned for inclusion in the by-laws of the scheme?
Please understand that this is, in no way, a comprehensive list of the 'traps' you need to look out for. There are many, many more - but you have to dig them out. And the best way, I have found, to uncover all the 'pros and cons' is to do some detailed research. It's amazing the wealth of knowledge out there in the marketplace - you just have to find it.
To save you a bit of time I've done some of that research and the variety of articles, reports and websites listed below should give you a broad spectrum of opinions from both sides of the fence. Always keep in mind the famous saying: "Caveat Emptor - let the buyer beware".
If there's anything that could give meaning to the above heading then the information webpage from Lawyers Conveyancing, Victoria on 'Off-the-plan purchases' would have to be it. There are a few references to some specific Victorian legislation and terms but, overall, it gives a terrific 'generic' overview and explanation of buying off-the-plan and all the twists and turns one might come across. This is worth a bit of your time....especially if this is an area of interest.
Don't forget to have a look at our 'old faithful' - The NSW Office of Fair Trading (OFT). As usual there's a summary guide to get you over the line from a knowledge perspective. It falls short of guiding you through the off-the-plan minefield but it does give you the essential basics:- NSW Office of Fair Trading: Buying off-the-plan
Here's a 'few' other information sources on this topic that may prove helpful. I know there's quite a lot - but they contain some really great information and you are making an important purchase. So grab yourself a coffee or a tea and settle in for a 'quiet' read.
- Peace of mind before you sign (by the Sydney Morning Herald)
- Buying "Off The Plan" – The Good, The Bad & The Ugly (by MRD-Property Investment Mentors)
- Buying off-the-plan requires courage and caution (by Hotspotting)
- Buying off the plan - tricks and traps (by Switzer.com.au-The Experts)
- Traps in buying off-the-plan (by NineMSN Money)
- Buying off the plan (by Guardian Property Specialists)
- Is buying off the plan a good idea? (by HomeSales.com.au)
- Beware "buying off the plan" (by The Crikey Blog)
- Before You Buy (by Law4U.com.au)
- The 4 Key Risks in Off-Plan Purchases (by James Market News)
An Important Tip - Detailed specialist advice should always be obtained from your solicitor before proceeding with any property purchase, so have a look at the Legal advice information page for more information.
Another Tip - If you're planning to use this new property as an investment - and therefore negative gear it - make sure you seek advice from an accountant to ensure you get everything you're entitled to. It's also very important that you structure the investment the right way from the very beginning and the accountant is the perfect person to help here.
If you need to know the meaning of one or more of the common terms mentioned above then have a look at the Strata Terms and Jargon Information page.
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