buying off plan

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ABC1234
Participant
@abc1234
Join Date: 2011
Post Count: 1
October 9, 2011 - 11:56 am
Hi all,
There are now so many apartments in Sydney that are “buying off plan” at rather expensive price. They require 10% deposit and approximately 2 years in waiting. So why put 10% idle for 2 years when I can use it on an existing property and start generating income?
I thought “okay, the property market may be up in 2 years, so I would have a windfall”, but I can argue an existing property would appreciate in 2 years plus the 2 years worth of income.
Much appreciated if someone would help me understand the missing piece of puzzle as these off-the-plan properties are selling fast. Mirvac in Chatswood sold out in 2 hours after opening the doors.
Thanks.
Derek
Member
@derek
Join Date: 2004
Post Count: 3,544
October 10, 2011 - 1:10 am
People often buy off the plan in anticipation of growth in the intervening time period.
Clever marketing mixed with naive investors and home owners are the reason some complexes sell quickly.
But big risks involved.
You are locked into the contract as soon as finance is unconditional, banks rarely (if ever) go unconditional without seeing titles issues, doing full vals and will only grant conditional approval. Therefore, at time of settlement the bank will reassess your position and many things could have changed by then and the bank can refuse your finance despite previously providing conditional approval.
Mick C
Participant
@shape
Join Date: 2010
Post Count: 1,099
October 10, 2011 - 9:00 am
ABC1234 wrote:
Hi all,
There are now so many apartments in Sydney that are “buying off plan” at rather expensive price. They require 10% deposit and approximately 2 years in waiting. So why put 10% idle for 2 years when I can use it on an existing property and start generating income?
I thought “okay, the property market may be up in 2 years, so I would have a windfall”, but I can argue an existing property would appreciate in 2 years plus the 2 years worth of income.
Much appreciated if someone would help me understand the missing piece of puzzle as these off-the-plan properties are selling fast. Mirvac in Chatswood sold out in 2 hours after opening the doors.
Thanks.
Mirvac in Chatswood – 2 whole floor was sold to one Chinese investor ….
Overseas buyers loves Off the plan, as it’s probably one of the few type of properties they are allowed to buy in Australia under the FIRB, and this is one of the reason for the quick sales and price…
I personally wouldn’t buy off the plan; plenty of reasons… you + Previous poster has mentioned 3 of them already.
Regards
Michael
Mick C | Shape Home Loans
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Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
October 10, 2011 - 10:43 am
ABC1234 wrote:
So why put 10% idle for 2 years when I can use it on an existing property and start generating income?
Investors do it in anticipation that the property will be worth more upon completion.
You don't necessarily need to use your own cash. You could look into a long-term deposit bond. To get one, you'll need to demonstrate that you own sufficient equity in property elsewhere (generally 50% of the purchase price).
You need to work out how much the interest repayments will be over 2 years on cash that you use and compare it to the cost of the deposit bond.
Both deposit access and deposit power are well known companies – both have online calculators that you can use for a quote.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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