Off The Plan- a gamble or a strategy.

I have been busy organising finance for an off the plan purchase for an apartment in Brisbane. Construction is expected to complete late 2014/early 2015. Everything went smoothly with the help of a property group called “rocketpropertygroup” and an amazing lawyer going through every little detail of the contract with me.

I’m still unsure about this strategy. Buying off the plan is basically when you put a deposit down for today’s price, and hopefully settle in 2-3 years when the price has increased. As the contract is for today’s price, the bank valuation at the end of completion should be more than what you paid for, hence giving you instant equity. The deposit you pay is placed in a high interest account so if for some reason the building is not completed, the deposit will be given back by the developer with interest.

The disadvantage would be if the valuation ends up lower than the contract price, than the bank will force you to put a larger deposit down. So it is important that you make sure you have a 10-15% buffer for extra payment just in case. Basically be prepared for the worst, and you should be fine (I hope)

I’m hoping to try this strategy to take advantage of depreciation benefits as brand new properties have higher depreciation and to also try a new market out of sydney city. Not sure if I am gambling or if this is a valid strategy yet. Time will tell.