FIRST TIME INVESTOR GUIDE to off-the-plan property in NSW
FIRST TIME INVESTOR GUIDE For Off-The-Plan Property in NSW DISCLAIMER: The information contained in this document is provided for guidance only. The information contained herein has not been independently verified. Colliers International encourages you to seek independent or professional advice to consider your circumstances. Actual results or factual statements may differ materially from those contained in this document as a result of a number of factors, including, but not limited to, changes in law, rules, regulations, operations, economics, markets, business conditions, capital markets, interests rates, foreign exchange rates, prices, equity, conflict, natural or declared disasters, or other acts of God. Colliers International makes no warranty, guarantee or representation, express or implied, that any opinion, advice, offering, product or any information in this document is accurate, complete, current or reliable. You are encouraged to make your own enquiries.
This guide will explain the steps of property investing so that you can make the most educated decision when investing in off-the-plan property in NSW.
1. HEAD OVER HEART When it comes to investing, you should always buy an investment property based on analytical research, not by what your heart tells you.
INTRODUCTION At Colliers International, we understand how important it is to achieve your property goals. From first home buyers to seasoned property investors, we are here to not only assist in your property transaction but also to support and guide you along the way. Buying a property in Sydney can be rewarding if you do your homework. As a global, cosmopolitan city, Sydney continually attracts new urban dwellers, young and old as its local population also grows. The ongoing Government spending on improving the local infrastructure, introducing more green spaces and entertainment precincts will only add more appeal. There has never been a better time to invest in property in Sydney - as the city becomes a Global City, appealing to domestic & foreign markets. Bricks and mortar, houses and units, may appear to be a lot easier to understand as an investment option when compared to the many other types of investments. However, before you make the big jump, why not consider the following information.
Will it provide the gains and returns you require? Will the location attract quality tenants? Will it appeal to the owner-occupier market that sustains property prices in the long term? By answering these questions, rather than buying a property because you loved the kitchen benchtop or views, you are thinking more about the economics, not the emotions.
FIRST TIME INVESTOR GUIDE
2. SET UP THE GOAL Successful wealth creation through real estate requires you to set goals, determining where you want to end up, and then devising a cohesive plan to get there. You need to focus on both the short and long term and ensure your investment decisions gel with your overall strategy. Work out what you want to achieve with regards to income – are you chasing short-term yields or long-term capital growth – and how you can best manage your cash flow as a smart investor. What type of property do you need to buy in order to meet your income goals? With a carefully thought through outline of your investment journey, you will end up exactly where you want to be.
3. EXPENSES Once you have a property in mind, work out your income and expenses. Think about the income you expect to get from it and what your regular expenses will be. Can you cover all if a sudden shortfall occurs? Buying, selling and managing an investment property can be costly and will affect your overall return. Will you handle your growing portfolio or pay a professional property manager? Property costs when buying can include stamp duty, conveyancing fees, legal costs, search fees, pest and building reports. Costs of owning a property can include: council rates, water rates, insurance, body corporate fees, land tax, repairs and maintenance costs plus property management fees. Make sure you chew the fat before you make a rash decision.
to off-the-plan property in NSW
4. DO YOUR HOMEWORK You may think you’ve found a good deal, but it is important to do your homework first! Understanding property markets takes time, speak with your agent and stay on top of trends by following sites such as CoreLogic RP Data, domain.com.au and realestate.com.au – which are good for market trends, including value increases and lending trends. SQM Research has a database for vacancy rates, identifying where tenant demand is strong and weak. Other things to consider, include: • Familiar markets - Consider buying property in an area you are familiar with, as it will take you less time to research. Check recent sale prices in the area to give you an idea of what you can expect to pay for local properties. • Growth suburbs - Look for areas where high growth is expected, with new government investment plans to the local infrastructure where there is potential for capital gains. Property experts regularly provide tips on up and coming suburbs. • Rental yield - Look for areas where rental income is high compared to the property value. • Low vacancy rates - Find out about the vacancy rates in the neighbourhood. A high vacancy rate may indicate a less desirable area. This may make it harder to rent the property and may make it difficult to sell in the future. • Planning - Find out about proposed changes in the suburb that may affect future property prices. Things like new developments or zoning changes can affect the future value of a property. At the end of the day, it all comes down to supply and demand. It is important to do your homework before making a purchase decision. The team of experts at Colliers International are also here to help you and can provide guidance, as well as useful tools - such as rental estimates and tax depreciation schedules.
FIRST TIME INVESTOR GUIDE to off-the-plan property in NSW
WHAT NOW? Many people get into property investment hoping to become overnight millionaires. They think property will be a quick fix to their financial problems, but the truth is seeking short term gains in real estate is more about speculation than strategic investing. The primary reason that bricks and mortar is a longterm prospect is that it lacks the liquidity and hence the volatility of other assets classes, such as shares. By approaching property investment with patience and persistence, you will gain far more success (and wealth) than if you seek out the “next big thing�. So now is the time to do your homework, get past that initial fear and you may just find what you need in an Off-The-Plan property.
CONSIDER OFF-THEPLAN PROPERTY
4. REPAIR COST SAVINGS
Some of the perks of buying off the plan include:
It goes without saying that a brand new home will not need the ongoing maintenance that an older property often needs. When purchasing Off-The-Plan the property will also come with a warranty period from the builder – providing you with assurance that any little bugs or repairs in your new property will be repaired without additional cost!
1. MORE TIME TO SAVE FOR THE PAYMENT
Plus, you have the luxury of moving into a property that is totally brand new.
Purchasing a brand new property fresh Off-ThePlan may provide the financial security you are after.
Buying Off-The-Plan is one of the easiest ways to get into the property market. You only need a 10% deposit and pay the balance of the purchase price at settlement, once construction is complete, which may take 18-24 months. Savvy buyers use this time to save towards moving costs, furniture, the settlement amount or mortgage amount.
5. ENERGY EFFICENCY Your Off-The-Plan home should be fitted with some of the most power-saving appliances and gas/water/ electricity systems on the market, which is a benefit for owner occupants and future tenants alike - leading to lower energy costs.
6. CAPITAL GAINS 2. CHOICE When purchasing off-the-plan you have a wide selection of apartments to choose from. From the configuration, to the apartments aspect, views and even the finishes or upgrades. Purchasing off-the-plan gives you more choice!
3. DEPRECIATION BENEFITS If you’re buying Off-The-Plan as an investment and plan to lease your new home to renters, you may be eligible for $1,000s of dollars’ worth of tax deductions. Get a full depreciation schedule from a quantity surveyor once your property settles. This will assist at tax time when claiming deductions for your new asset’s brand new fittings and fixtures.
When you buy off-the-plan, you lock in the sale at the current market price, and once construction is completed, the value of your property may have increased along with the market.
FIRST TIME INVESTOR GUIDE to off-the-plan property in NSW
Why are Off-The-Plan apartments attractive to investors?
Building insurance when buying new
Capital growth in short-time frames
Opportunity for the property to grow in value during the construction timeframe.
The Off-The-Plan Purchase Process
1. TO ENSURE THAT NO ONE ELSE CAN PURCHASE YOUR PROPERTY
2. YOU WILL BE REQUIRED TO SIGN A CONTRACT WHICH WILL THEN BE SENT TO YOUR SOLICITOR TO BE EXCHANGED
3. ONCE THE BUILDING IS COMPLETED, A CERTIFICATE OF OCCUPANCY IS ISSUED & THE TITLES ARE REGISTERED
Complete a Sales Advice form with your Agent.
Pay an initial deposit to take the property off the market
YOU NEED TO...
UPON EXCHANGE...
Exchange contracts with the vendor.
Pay the balance of the deposit amount (10% minus the holding deposit). The contract is now legally binding.
A SETTLEMENT AGENT WILL CONTACT YOU...
To arrange a pre-settlement inspection of your property.
To notify you of the settlement date.
Then the key to your brand new property is yours!
FIRST TIME INVESTOR GUIDE to off-the-plan property in NSW
HOW TO PREPARE FOR SETTLEMENT? Your dream Off-The-Plan property is just within reach. From your initial visit to the display suite to making the 10% deposit and signing the contract. As your property construction completes, a Settlement Agency will be in contact with you to prepare for your settlement. This usually takes place between 3-4 months prior to the completion of the development, and a settlement agent will walk you through the process and instruct you on preparing your finances for settlement.
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