Buying a property before it is finished may come with some risk and uncertainty. But it also comes with undeniable benefits that any current and future homeowner should at least consider.
When you purchase a property before it is built, it’s considered buying off the plan. The name derives your main decision driver: initiating the property transfer not because you love the property or house, but because you are convinced for the existing and future plans for it.
That, in turn, comes with a number of benefits. If you’re considering buying off the plan, here is what you can expect in terms of potential positive rewards.
1) Influence the Final Outcome
Typically, when you buy property, you buy the final outcome. Any choices in finishings and even room design and outline have already been made by others. Finding the right property means finding a compromise that fits your needs as closely as possible.
When buying off the plan, that’s not necessarily the case. Instead, you might have the ability to at least somewhat influence the final outcome of the construction. In some cases, that actually means changing and updating existing blueprints. Most often, though, it refers to the ability to change finishings, appliances, wall colours, and other items that would otherwise require a renovation to get them to match your needs.
2) Take Advantage of Stamp Duty Savings
Stamp duty refers to the tax you have to pay when buying property. It’s typically calculated using the value of the land at the time that the transaction contract is signed. That, in turn, means that buying off the plan can give you potentially significant stamp duty savings.
If the construction or refurbishment of the property in question is not yet complete or hasn’t even started, the value of the property will be significantly lower than it would be for a finished construction project. The earlier in the construction process you sign the contract, the lower the value of the land will be and the less you will have to pay in stamp duties.
3) Benefit From Significant Tax Benefits
Buying off the plan may also result in other, often significant savings. A main factor is the tax benefits you might be able to claim when making this type of purchase early in the construction process.
For instance, you can claim additional tax savings for the investments made in the construction after you sign the contract. Similar to tax savings, a contract signed early can result in more significant potential savings.
Don’t take these tax savings for granted, as many of them depend on your individual situation. Instead, talk to your financial advisor or other licensed professionals for advice unique to your purchase off the plan. That way, you remain within the limits of the law, while still maximising your tax benefits.
4) Buy Extra Time to Save for Your Down Payment
When buying property in Australia, you need to add a down payment in order to get your loan. Typically, the lower limit for that down payment is right around 10 per cent. However, when buying off the plan, you may be able to delay that down payment in order to give yourself extra time to save up for the purchase and reduce your monthly loan payments. You can pay your deposit through a so-called deposit bond, which gives the money to the vendor without immediately impacting your finances.
Your exact contract will determine the exact nature of your down payment. If you have to pay it at the time of your signature, this benefit may become negligible. But often, the relatively long turnaround time results in additional opportunities for the new property owner to save up on a potentially more significant down payment.
5) Save Money on the Property Itself
Finally, it’s important to recognise that by buying off the plan, you can save money on the price of the property itself. Most homeowners taking this option end up saving in two distinct ways:
- Benefiting from a lower overall purchase price, as the property in question is more difficult to sell on behalf of the vendor.
- Locking in the price at the time of the contract, insuring yourself against potential bidding wars or rising property prices in coming years.
Combined, these benefits can turn into a drastic benefit for you. For many individuals and even businesses, a new property is amongst the most expensive and significant financial decisions in your lifetime. Saving costs by making a decision early might allow you to afford a space that better fits your individual needs.
Of course, buying off the plan also comes with a number of risks. The uncertainty may mean that the final project does not turn out exactly as imagined, and the paperwork can become more complicated. If you’re not aware of the fine print in the contract, you may run into trouble.
As a result, you need to work with professionals who can easily tell you about the nuances involved in this type of property transfer. Licensed conveyancers or solicitors take care of the paperwork for you, making sure that you don’t run into any unexpected surprises.
To get to that point, your first step should be to find a professional qualified to help you and your unique needs. Speak to one of our team today about how the Titlexchange Conveyancing Marketplace can help you to find that professional, giving you the perfect starting condition to take advantage of the benefits associated with buying off the plan.