25 September 2022
Buying a property off plan has some fantastic benefits for you as an owner. These include big savings on the purchase price and stamp duty, tax benefits, top rental returns and low maintenance costs. Savvy investors use these benefits to their advantage to build their property portfolio.
Make sure you're aware of all the benefits of buying off plan so you can use them to your advantage.
Check out the 15 Major Benefits Of Buying Off Plan below to find out why buying off plan is the smartest way to buy property...
When you buy off plan you lock in your purchase price and if property prices go up in the area, and your property increases in value, you don’t have to pay any more. As most developments take at least 18 months to 2 years to complete it is not unusual for an off the plan property to rise by $50,000 or $100,000 or more from the time of commencement to completion, especially in an upward trending market.
This is how smart investors use buying off plan to build their property portfolio. They leverage the capital gains they achieve to buy more property and repeat the process.
In most cases developers will price their projects very competitively compared to surrounding comparable properties as they know they need to do this to attract buyers to their off-plan project. Also, in the early stages of a new development the developer will often offer discounted prices to get sales rolling. Once construction commences prices will usually rise however developers will often offer discounted prices on any unsold lots towards the end of the development to finalise the project.
When you buy off plan in many cases you are getting a much cheaper price than what the property is valued at on completion. The key of course is to choose the right project - from a developer with a proven track record.
There's nothing like moving into a brand-new property that has never been lived in. The possibilities are truly endless. If you're planning to move into your brand new off plan property then you get to enjoy that new home feeling, it's all yours to do as you please.
If you're an investor looking to rent out your new property you can expect to achieve higher rental returns because it's new.
Also, as you are buying new you are covered by the Builders Warranty for six years.
There is the potential for huge stamp duty savings if you purchase a new off plan property instead of an established property. Certain buyers can apply for an exemption or concession depending on which state so check with state or territory government to see if any exemptions or concessions apply in your case. In some states if you are a first home buyer planning to live in the property then you are exempt from stamp duty.
Getting in early on the development can also lead to substantial stamp duty savings particularly in Victoria where stamp duty is calculated on the land’s value at the time of purchase.
Also, in some instances developers will offer "no stamp duty payable" as a sales incentive.
Any property you purchase in Australia will be subject to stamp duty payment which is a tax levied by state and territory governments. For example on a $600,000 investment purchase the following stamp duty would apply for each state:
NSW $22,398, Vic $31,699, Qld $22,089, SA $32,350, WA $23,000, and TAS $22,865.
As we can see the stamp duty payment is between 3.68% and 5.39% of the purchase price. So any savings on this hefty tax sure can help!
When you buy off plan you are purchasing a brand new property which usually attracts higher rental returns due to the fresh and modern fit outs and feel.
You can generally expect to achieve a higher rental yield than on an older comparable property in the same area. Tenants get to move into a new property and are willing to pay more for this.
5. Top Rental Returns
If you’re buying off plan as an investment and plan to rent out your new property you should be eligible for thousands of dollars in tax deductions. Make sure you get a full depreciation schedule from a trusted quantity surveyor once your property settles as this will make it far easier for you to claim deductions at the end of the tax year.
Claiming your full depreciation benefits means your holding costs will be much lower as the tax man is covering a bigger portion of your investment property expenses.
Greater tax advantages apply to newer properties due to greater depreciation that is regarded as a legitimate non-cash expense on your investment. Depreciation benefits are at their highest in year one and you can claim on both the building as well as the fittings and fixtures such as carpet, blinds and appliances. In some cases, you can even right off the full costs of appliances immediately.
6. Tax Benefits
Your brand new off plan property is much less likely to require repairs or maintenance than an older property.
In addition, you are covered by the "Builders Warranty" or "Home Warranty Insurance" which covers structural work in NSW, Vic, Qld and WA for 6 years and SA for 5 years, but not in Tasmania. In NSW and Vic non-structural work is also covered for 2 years.
The Builders Warranty gives buyers confidence over the maintenance costs likely to be incurred. Investors are legally protected on the building performance of their purchase and will not need to continually spend cash on fixing small maintenance items.
In addition, off plan properties come with brand new appliances, which means a range of manufacturers warranties are in place for everyday items such as the stove and heating/cooling. This again provides less risk of ongoing costly maintenance on the property, which is usually an unknown quantity when buying an older property.
7. Lower Repair & Maintenance Costs
The name of the game when buying off plan is to get in quick with the right developer, so you have the widest choice of the best options available. Want the top floor apartment with the north facing view? Be first in and you can secure your choice!
Even if the development is partly or even near fully sold you still have more options than when you buy an established property.
8. Take Your Pick
When buying off plan developers allow you to choose your colour scheme, size, floor plan, which level you would like to be on and give options that allow you to tailor your new property to your personal preferences. These are options you just don't get when buying an established property.
9. Have Your Say
When you buy off plan you are not just buying a new property you are also buying yourself time to save and plan. Most developments take 12-18 months to complete so this gives you valuable time to make plans and organise your finances.
One of the biggest financial advantages of buying off the plan is the fact that you only need a 10% deposit up front. This means you are not required to commit a large portion of your cash reserves or borrowing capacity until the project completes.
Once you have paid your deposit you are not required to pay any more until settlement. This gives you as an investor the freedom to keep your funds working in other areas, while knowing you have safely locked in your purchase price.
If you plan to occupy your new property, buying off plan gives you plenty of time to organise the sale of your existing property or end of lease.
10. Buys You Time
When you buy a property off plan you are only required to pay a 10% deposit and in some cases you may be able to secure your property with just a 5% deposit.
While most people pay cash to secure their deposit, there are also other more flexible options that you can consider. These include using a Bank Guarantee or a Deposit Bond. Check with your Buy Off Plan Consultant to see if the developer will accept 5% deposit and what methods of payment they will accept.
11. Options On Your Deposit
When buying off plan, your deposit is held in a solicitors trust account which means you cannot lose your deposit. There is a common misconception with buying off plan that if something goes wrong with the developer and they are unable to complete the project you will lose your deposit. This is simply not the case. The developer can't access these funds as they held securely by the solicitor and are often invested to earn you interest.
12. Your Deposit Is Secure And Earns You Interest
When you buy a property off plan you are only required to pay a 10% deposit with settlement not due to completion of the project which will be, in most cases, 18 months to 2 years down the track. This gives you time, without the pressure of making mortgage repayments, to save, organise finance or sell your existing property.
13. Delays Mortgage Payments
Changes to the Australian Building Code mean new properties must meet stringent energy efficiency requirements meaning that power is delivered more efficiently resulting in reduced power bills for you as an owner. In addition, new off plan properties are fitted with brand new energy efficient appliances and heating and cooling systems further reducing power costs.
14. Reduced Power Bills
Check to see if you are eligible for government help with the costs involved in buying a property off plan. For example, you may be able to get a government grant if you’re a first home buyer. The First Home Owner Grant (FHOG) scheme is designed to encourage and assist homeownership across the country. Eligible first home buyers can take advantage of the first home buyer grant with savings between $10,000 - $15,000 depending on which state you live in.
It's a good idea to contact your state or territory government to find out if you’re eligible for the Grant or any other incentives or concessions for buying new.
15. Access Government Grants
What we find is that most people have heard of buying off plan but have never really looked into how advantageous this way of buying property can be.
There are some fantastic benefits in buying off plan but the secret to making it work for you is to pick the right project from the right developer. This can be tricky as there are a lot of options in the market at any one time.
At Buy Off Plan we partner with Australia's leading developers who have proven track records of creating outstanding projects that achieve high capital gains. This allows us to provide you with the very best buy off plan options.
Check out our current projects to see the very best buy off plan opportunities on the market today.
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Buying an investment property can certainly set you on the path to financial freedom. Whether your goal is to pay off your home quicker, replace your existing income or retire early - making the right property investments can help you achieve those goals.
However, the challenge is navigating the market to find the best option to suit your individual needs.
Our licenced consultants can help you determine whether buying an investment property is the right course of action for you.
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