Buying a new property is a great way to build assets and wealth. When buying a property, you can choose to buy a home that has already been built or you can opt to buy off-plan. Buying off-plan means purchasing a property that hasn’t been erected yet. This can present a set of challenges as you are buying a structure that you can’t see, so doing your due diligence is important prior to purchasing off-plan.
Here are a few things you should know about buying off-plan:
1. Research everything there is to know about the developer
Before buying an off-plan property, make sure that you know everything there is to know about the developer. Choose a developer with a solid track record to prevent any mishaps, such as a development that stops halfway through. You also need to be sure that the developer you’re buying from is selling you a property that is structurally sound and well built.
Talking to people who have previously bought from the developer is also a good way to gauge how good a developer is. Added to this, you can look up reviews online and compare the developer’s old marketing material with the finished product to make sure that you’re satisfied with how they build.
2. It could be easier to get a mortgage for off-plan properties
Sometimes it’s easier for homebuyers to get finance from a financial institution when buying off-plan from a development that has been approved by banks. Getting pre-approved and receiving a pre-approval certificate can also make it easier for banks to finance an off-plan homebuyer.
3. Read the fine print
Be sure to read and understand all contracts and written agreements. Get a property lawyer to review contracts and written agreements, and to explain them to you so that you know what you’re signing. Always read and understand the fine print thoroughly to avoid any unpleasant surprises down the line.
4. Buying off-plan can save on costs
The advantage of buying off-plan is that there are no transfer duties involved. Added to that, VAT is included in the purchasing price. Buying off-plan can assist you to save on a lot of costs and maximize your potential rental yield. Due to the fact that the property has been unoccupied, it will most likely be attractive to a broad range of prospective tenants as tenants are usually willing to pay more for homes that haven’t been occupied before.
A brand new property also means you don’t have to worry about repair and upgrade costs associated with old properties.
Buying off-plan is also significantly cheaper than buying an already built property, meaning that when you decide to sell, you will have made a significant return on your investment. Furthermore, if you’re buying off-plan in a sectional title scheme, you’ll only be expected to start paying when the entire development is complete, and sometimes only when your part of the development has been built.
5. The Consumer Protection Act (CPA) protects off-plan homebuyers
The CPA protects buyers and gives them the right to ask for the developer to comply and fix any structures that deviate from the original plans within three months. Within a year, buyers may request that any roof leaks caused by poor materials and shoddy work be fixed and within five years, one can ask that any structural defects that don’t comply with building standards be fixed.
6. Consider that the project might be delayed, which can affect your mortgage offer
Mortgage offers typically last for 3 to 6 months, so a delayed development can seriously hamper your ability to get a mortgage as the property market is constantly evolving. Getting professional advice from a mortgage broker is recommended to make sure that you have all your bases covered.
Although buying off-plan may seem risky, when enough research is done, investing in off-plan properties can be quite rewarding in the long-term. Keep the above 6 tips in mind when looking for a developer to purchase property from.