When it comes to buying property, there are all sorts of properties you can buy including brand new and established. However, have you asked yourself the question, “Should I buy off the plan property?”
The simple answer to this is yes depending on your ultimate goals. There are many advantages to buying property off the plan, but you need to consider your reasons for buying a property in the first place. Some key questions to ask yourself include:
- Are you buying a property as an investment?
- Are you looking to hold onto the property as a longer term investment?
- Will you be renting the property out to generate a rental income?
- Do you have the 10% deposit available to buy today?
- Do you want to avoid mortgage repayments straight away?
- Are you happy to wait for the property to be completed?
- Do you want to take advantage of government grants and stamp duty savings?
- Are you planning on using this property to help fuel your retirement?
- Do you want a new build?
- Are you looking to buy close to the CBD?
If you have answered yes to the above, then buying an off the plan property is probably the right move for you. Here’s why:
1) Capital Gains
The beauty of buying an off the plan property is that if bought in the right location at the right price you have the potential to earn a lot of money through capital gains. You can also take advantage of capital growth due to waiting for the property to complete which could take a couple of years, by which time your property has gone up in value and you have not paid a cent in mortgage repayments and associated costs.
This means that you can start to build your property portfolio and use some of the equity in this property towards your next property investment.
Just remember that buying a property is definitely not a get rich quick scheme and should be looked at as a longer term investment; however if bought in a high growth area, this process can be sped up.
2) Tax Benefits
Another great reason why you should buy an off the plan property is the numerous tax benefits you can take advantage of including depreciation. Granted, an established property bought as an investment can also give you tax savings, but an off the plan property gives you so much more. Take depreciation for example, a new build will generate much more savings compared to a 30 year old house with the highest savings claimed in year one. There’s the potential to save thousands of dollars in tax deductions, just make sure you have a depreciation schedule drawn up by a reputable Quantity Surveyor.
3) Stamp Duty Savings
If buying a new off the plan property then you have the potential to save thousands of dollars in stamp duty, especially if you are a first home buyer. As a first home buyer purchasing an off the plan property you might be eligible for stamp duty savings and the first home owner grant which you cannot claim when buying an established property. In New South Wales, that could mean a total saving of approximately $35,000. Who would turn their nose up at that?
4) It’s New
Let’s face it, everyone prefers new, whether it’s a new car, new phone or new property. If you were a rental tenant and had a choice of the type of property to rent, the likelihood of choosing something new over an older property is much higher. A new property also generally means there is less maintenance and repair work needed as well as lower power bills as a newer home should be fitted with power-saving appliances.
So if you want to own something new that involves less maintenance and repair work, whilst benefit from numerous tax savings and stamp duty savings with the potential of earning capital gains then you should buy off the plan property.
Published on 19th of June 2015 by Marty Stanowich