Some rules to follow

Consider Buying Off The Plan

For those looking for a good, but higher risk strategy to generate wealth the benefits now offered for buying off the plan are looking attractive. Having said this don't do it without careful thought.

Some rules to follow:

1. Try to only buy in developments which are relatively small. That is not more than say 50 units in a block;
2. Make sure the development is close to transport modes;
3. Make sure the development is relatively close to a major Suburb centre and better still close to the inner city. In this area selection process it is worth using the Residex Top 100 prediction reports to identify suburbs with the best growth prospects and go to Homesales to find listed opportunities in these areas. Remember in all of this there are no certainties but careful selection and care over price should yield success.
4. Choose at least properties with two bedrooms;
5. Ensure the developer has a good building record and the quality of past development has been good;
6. Ensure the developer has the financial capacity to complete; and
7. Buy at the right price. On this issue I make the following points:

a.      Your purchase price should be based on a similar property sale price as at the day that you enter into the contract to purchase not the anticipated value on completion and delivery of the unit;

b.      It might seem hard to price your purchase by simply looking for recent sales of new properties in the area so use Homesales to get a good idea of current asking prices for similar properties listed in the locality.

For those who are interested in doing this then do it sooner rather than later because as this type of market gets up steam, the developers are going to increase their prices as there are more people interested in doing this and competing with one another to get the Government Stamp Duty benefits.

John Edwards

Residex CEO

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August 2010