Investment Property off The Plan or Established

yappiah on 31/10/2016 - 12:33

I don't know where to get better advised that on Ozbargain.

Girlfriend and I want to get in to the "property" market.
We are only just in the process of researching and getting our finance together.

We've manage to save about 70K so far..

We plan on "hopefully" being able to buy by June 2017 at the latest.

So far, we've only been able to establish that we want our first property to be an investment one and not one to live in.

However we are having trouble deciding whether to go "off the plan" or "established", in Sydney or outside of Sydney(as its too expensive).

Do any of you experienced ozBargainers have any advise for me?

Thanks

Poll Options

  • 3
    Off the plan is Sydney
  • 4
    Established in Sydney
  • 0
    Off the play outside of Sydney
  • 22
    Established outside of Sydney
Financial

Comments

  • theacekiller888 on 31/10/2016 - 12:47
    +3

    Hello! It actually depends. I personally prefer going for established ones as you can measure the value reliably which is the biggest problem in off the plan properties as you may end up toping up your deposit in case the value of the plan property goes down by the time it settles. Thus, it will be very important that you do your research very well. Best of luck!

    • TheOneWhoGotAway on 08/05/2017 - 09:35

      Hi,
      I'm actually doing my research now and struggling how to get data specifically about off plan apartments. I would like know the price payed before completion then find the price sold a few years down the track.

      So far I only know on domain and realestate.com.au websites you can see the property data for units as a whole.

      Any advice how to go about this?

      • mskeggs on 08/05/2017 - 09:51
        +1

        Not sure how to find pricing for individual units, though the sales must be registered so will be available.
        See this discussing this topic:
        https://www.domain.com.au/news/offtheplan-buyers-seeing-loss…

        That anybody sold for a loss during the biggest boom period in my life time is frightening.
        I will note, I am presuming that article doesn't consider depreciation, as that can make a huge impact for investors in a high tax bracket.

        • TheOneWhoGotAway on 15/05/2017 - 08:45

          Hi, thanks for your reply, below is a few questions, do you think it'd be a good idea to post my questions here (or another forum)?

          While it's good to hear that you'd probably won't sell at a loss, the article's figures are quite frightening. In Sydney where I am, 7.5% compared to 25.9% from established apartments. And I think it said this was from 2011, not sure how many years later down the track but I was hoping perhaps after 5 years off plan would catch back up.

          I also saw a similar article http://www.news.com.au/finance/real-estate/selling/its-easie…
          the first graph shows that Sydney is kind of safe from losses at only 4% selling at a loss?

          I think the biggest thing I worry is paying too much for a property, where it's overvalued, then banks won't lend for the bought price and also would take ages to make up loss. Maybe thats where the 7.5% come from in your article.

          I am also curious if you have an opinion on Sydney's influx of apartments as supply will be increasing in the coming few years. Certainly I would hold off buying if the price of off plans started to drop because of this supply.

        • Kommyht on 15/05/2017 - 08:55

          @TheOneWhoGotAway:
          Propertychat is a property specific forum. Lots of members who have experience buying off the plan (myself included). Worth a look.

  • Skramit on 31/10/2016 - 13:22
    +1

    Personally I wouldn't be saving hard to buy an investment property as a first property purchase. If I spent a couple of years saving I'd want to live in the bloody thing I bought haha :)

    Off the plan almost always carries more risk than established because the purchase prices are often just arbitrary prices set by the developers and not "real" market figures. So they could come crashing down shortly after you buy or stay the same or increase. But the risk is definitely higher that your apartment could drop in price post build. Developers are in the making money game, not the "selling fairly priced new properties" game.

    There's always the added risk of delays, poor finishes, not what you expected etc etc. At least with an established place you can see what you're getting (mostly).

    If keen to buy off the plan, do lots and lots and lots of homework. Get professional advise i.e. a real estate broker or somebody to help you with knowledge.

  • mskeggs on 31/10/2016 - 13:22
    +2

    Depreciation of new properties is a major source of "value" if you are seeking to negatively gear.
    If you anticipate a positive cashflow, I would probably say established.
    But really, all you are getting is peoples personal preference.
    You haven't said enough about your circumstances and goals to make an informed opinion.

  • garetz on 31/10/2016 - 14:07
    +2

    What you are asking here, is how long is a piece of string ? Its an impossible question to answer, there are way too many variables at play. Talk to a financial adviser who can tailor a plan to your needs.

    Also before you even consider buying off the plan, research the risks involved, as there are a fair few.

  • mchoodie on 31/10/2016 - 18:01
    +2

    Stress test your ability to service the loan in worst case scenarios. You're dependent on many variables that are outside your control which you need to consider (brokers may not necessarily do this for you):
    - what if your investment property is unoccupied
    - rent decreases/below off the plan estimates (which always would be)
    - how much you can contribute out of your savings to this in a worse case scenario
    - what if your financial situation changes (kid, redundancy)

    After which you should definitely engage someone to assist you with fully making use of tax allowances to help make your decision. The above list are only some considerations in helping you make your decision.

    Saving a deposit and then being frugal is the easy bit which is enough for good investment decisions during boom time.

    Lastly, start inspecting, viewing potential places asap. Speak with mortgage broker and get them involved in your decision making. You will benefit from being "in the market" leading up to June 17.

    Good luck!

    • yappiah on 01/11/2016 - 16:02

      Very informative.. Thanks

  • djkelly69 on 01/11/2016 - 13:51
    +1

    I would not buy off-the-plan anywhere unless I really knew the builder/developer.

    Do you realise you are burning your first home buyer duty concession if you buy an investment property?

    • mchoodie on 02/11/2016 - 21:13

      Do you have a point of reference for that?

      I had a look at the stamp duty calculator on infochoice and you're correct. But does your first home mean your first owner occupier home OR first house purchase? I thought it was only when you buy a property that you classify as owner occupier and any investment property purchase doesn't proclude you from the first home buyers benefits.

      I am not sure if I am right though and would love to be corrected.

      • djkelly69 on 02/11/2016 - 21:45
        +1

        www.osr.nsw.gov.au/grants

        If you check out the requirements for the "First Home - New Home Scheme" (ie. the stamp duty concession), it says "you or your partner have not previously owned residential property in any form in any State or Territory of Australia". Fairly clear cut.

        The FHOG (ie. grant) however is different - it says:
        "You or your spouse (including de facto spouse) have never held a relevant interest in any residential property in Australia prior to 1 July 2000. However, you may be eligible if you or your spouse, including de facto spouse, have only had a relevant interest in any residential property in Australia on or after 1 July 2000 and you have not resided in that property for a continuous period of at least 6 months." So having owned an investment property won't preclude you (for the grant only) as long as you haven't lived in it for more than 6 months.

        Of course, all of the 'first home benefits' are currently targeted at brand new homes/units, so if you don't buy a brand new home you get nothing.

        (Should also note that this is for NSW, and varies greatly from state to state.)

        • mchoodie on 03/11/2016 - 08:19

          Thanks.

  • Euphemistic on 02/11/2016 - 21:32
    +1

    Look at buying your first home to live in, at least for the minimum time to keep the benefits of buying your first home.

    Off the plan has some inherent risks outlined above.
    Established means it is there, ready to go, but could have some issues that require repairs.
    Buy where you know. you don't want to buy a nice looking location and after purchasing find out it is known as 'Mt Druit by the sea' (Umina)
    If you buy an investment property seriously consider only buying where you would live, that way if renting it out doesn't work out then at least you can move in and save renting elsewhere without disrupting your life too much.

  • lehatu on 07/11/2016 - 11:01

    What i suggest is to study the POSITION of the property, off-the-plan or not, doesn't matter if the position of the property is right.
    Let's say somewhere get a big upgrade from the government, or somewhere near shops/train/jobs, then there will always be someone who wants it.
    Off-the-plan mean you buy 2018 property at 2016 price, if the position is right, the price and the rent will always be fine.

    A fellow investment consultant, if you need anything more feel free to ask.

    • TheOneWhoGotAway on 08/05/2017 - 10:06

      Hi hello,
      It's 2017 and I'm researching to make a similar choice. I understand that location is a big factor, I have some places I like but are there any tools I can use to quantify the 2019 property for 2017 prices?

      I've been reading articles about off plan in some cases loosing value, I think this is just Parramatta?

      Just wanting to so some research to back up the anecdotal stories I've heard.

      • Kommyht on 08/05/2017 - 18:04

        Sadly no one can anticipate what the property market will be in 1-2 years time when your off the plan apartment is completed. Research the area, visit council websites for known development plans, research the developer to see if theyve built lemons in the past.

        I went hard for several OTPs back in 2010-13, got lucky the market was rising and all were decent builds in gentrifying areas.

      • lehatu on 10/05/2017 - 21:44

        Hi, mind if you pm me your email? We can have a chat :)

  • tajid on 11/05/2017 - 10:09

    You could always stay in the new property for the first 6 month if you'd like to still get your first home grant & stamp duty concession. I did that with my first NSW property or I'll PM you for the alternative (your PM is off) but what i wanted to say was if you have friends looking for rent around the area you could always rent it personally to them but still keep all bills under your name for the first year.

  • samprofs on 11/05/2017 - 10:40

    Develop your own. Something like I am doing now. Keep front house, subdivide and build at the back. Sell front and keep the back (brand new) as a long term investment due to superior depreciation :)

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