Nicola Kelland - Is buying off the plans in a property development a good move?

Buying off plans in a property development can be a good way of getting you started on the property ladder, providing an investment property for a portfolio or a way of getting the apartment layout designed and finished the way you want.

Important considerations:
Who is the developer, are they experienced, what previous developments have they been involved with and what does that development look like now?

Is it well constructed and designed, are the owners happy there?

It is important to have your solicitor review the sale and purchase contract. These are not usually a standard contract used for the sale of existing property - they are specifically written for purchasers and developers buying and selling off the plans.

These contracts will include draft unit plans, specifications, conditions of the purchase and sale and a raft of legal clauses which in general are written to favour the vendor, so it is vital that you have your solicitor approve this document if you are not well experienced in this type of documentation.

Find out what, if any, changes that can be made. Some developers of high-end developments allow for some flexibility in design and finishes to enable the purchasers to personalise their property. Often at the lower end of the market, this is not possible, as pricing of apartments is highly dependent on cost effectiveness.

In my experience, it’s best to get in early to get the most desirable apartment. Usually apartments at the top with views, garden apartments or end units are the ones that go first.

Deposit:
Most developers require a deposit between 10%- 20%, usually with an up front initial payment and then a further payment once the developer has declared that they are proceeding. It is essential that this money is held in a Trust Account until completion and settlement.

Investment:
Apartments can be a very good investment, either for capital growth, or on an investment return basis. When looking for capital growth, I find that more unique apartments tend to do well. They could be unique for a number of reasons including the type of building, if it is a heritage development, a great location, on the waterfront, has distinctive style or is architecturally significant. Look for a development that has a point of difference.

For an investment to work, it must be the type of apartment that will rent well. Outgoing costs are a consideration as these eat into the income received and lower the return.