I'm new to the property market and have been introduced to what is supposedly a "great deal". Its an off-the-plan purchase due to complete in mid/late 2011. How do I go about evaluating the credentials of the developer?
I've received some research reports and figures from the marketer, but I can't bring myself to trust those a 100%. All the research reports are from Blue Weatlh Property, which is run by a guy called Dr.Tony Hayek. I think he started up Pulse Property as well (or at least worked there as a General Manager)
The price for a 2BR isn't much different from current market – although it apparently has a "superior design architecturally". Admittedly, the artist impressions look fairly good. And the floor layout of the unit looks to be well thought out.
What else should I be look out for?
Opinions please?
The first thing I usually look at with off the plan purchases are comparable sales in the area. Also, I look at units that are up to 5 years old just to see what people are really willing to pay on the open market, not just off the plan. If you can find a 2br unit that has a similar aspect etc, and the price is the same, then it's a great start. And don't forget, when you're looking at comparable sales, try and find out what things were actually sold at, not just what the asking price is. Many people look for a reason to buy, to justify their earlier decision – be wary of this thought process.
Secondly, you have to get a feel for if the property itself is in an area that is worthwhile investing into. I've had many a client come in with what looks like a great oportunity when you look at micro factors, such as price, layout etc – however the areas have been complete duds.
Other areas to look at are things like the sunset clause of the contract (if it gets delayed, can they walk away from your sale and potentially sell it at a higher price to someone else?) inclusions etc etc.
It's not a comprehensive list, but I hope it helps a bit.
Just read Margaret Lomas on buying off plan
I personally don't like buying off plan..
including the price is normally inflated (commision, advertising), almost always delayed due to GFC, risk of lower valuation when completed etc…Though the selling agent will mention … high depreciation, high rental return etc ….
But the point is… what is the re-sell price if it goes to market for auction??
Thanks for the feedback.
At the moment, it looks like a decent purchase. The price doesn't appear to be inflated, judging by recent sales in the area and current ask for similar styled units.
Of course, if prices soften when it comes time to settle, it is still going to hurt. However, the area appears to have potential (around Parramatta – which appears to have a lot going for it).
It would be a speculative play, but even it won't break my bank if I end up having to hold it even after completion. Although the ideal is to sell for an adequate return before I have to settle.
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