Ensure you never miss an issue of the
real estate business bulletin
Buying off the plan's 'shady reputation' undeserved

Buying off the plan's 'shady reputation' undeserved

by Staff Reporter 1 comments

Buying off the plan is a solid strategy for property investors as long as they understand the risks, according to one property management expert.

Owen Davis of DFG Property said that buying off the plan doesn’t deserve its “somewhat shady reputation”, but investors must understand the risks and be ready to manage them.

“From the time you sign the contract, the value of the property at settlement can be different from the price you agreed to pay,” he said.

“It can really ruin your day when you arrive at settlement date only to find your bank won’t lend you the amount you requested because they’ve valued the property at less than you agreed to pay the developer.”

Mr Davis said the main reason this happens is to do with property markets and valuers.

“It’s the job of the bank’s valuer to protect the bank from bad lending decisions, so they’re a bit more conservative than a more optimistic developer,” he said.

“When it’s a large development, or there hasn’t been a lot of comparable sales in the area to get a guide, a bank’s valuer may err on the side of caution and inadvertently undervalue a property.”

Mr Davis said property markets can be hard to predict, but with some due diligence and a bit of luck, investors can reap the rewards.

“If the property value goes up, for little to no deposit you’ve secured the property under your name, paid little or no deposit and made a capital gain without paying any interest,” he said. 

Buying off the plan's 'shady reputation' undeserved
lawyersweekly logo
promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

The REB Top 100 Agents ranking is the foremost ranking of agents in Australia. It has set the bar for excellence in Australian real estate. To be ranked as an REB Top 100 Agent is the standard real estate professionals strive for. See the full 2018 ranking here!

featured podcast

featured podcast
An industry where the resilient succeeds

Tim Heavyside believes that a strong support team and good foundations are paramount to success in the real estate industry, and with regu...

View all podcasts

Would you consider working for Purplebricks or a similar 'DIY' model?

Yes (7.2%)
No (80.9%)
Perhaps - make me an offer (12%)

Total votes: 209
The voting for this poll has ended on: July 13, 2018
Do you have an industry update?