Have PPOR and IP in Richmond and cash flow is becoming a problem so i want to buy off the plan in same area or close by with long settlement hoping for capital growth between now and then.Never bought this way open to any feedback/suggestions or other options.What to look for? and what to look out for? thanks
Buy off the plan
- Thread starter spiduda
- Start date
If you have cash-flow problems, why would you possibly set in train a process that requires you to incur additional debt?
If you're proposing to fix today's cash-flow problems by a bet on flipping the property before settlement, you are most likely going to join a long list of punters burnt by OTP speculating.
I have seen people make loads of money (not me personally but clients of ours) and people financially ruined by doing this. It comes down to knowing what you are looking for.
Make sure the price is at TODAYS fair market value not the a market value predicted for 5 years time!
Get an independant valuation (yours not the developers)
Get an independant rent appraisal and make sure they are NOT offering rent gaurantees, this is a signal that the price could be inflated!
If you can get it at a discounted price (ie 20 to 25% below valuation) it will be an added bonus. Some buyers agents are able to secure these. I won't use this forum to spruik as I have a vested interest but email me if you want a referral.
Make sure the price is at TODAYS fair market value not the a market value predicted for 5 years time!
Get an independant valuation (yours not the developers)
Get an independant rent appraisal and make sure they are NOT offering rent gaurantees, this is a signal that the price could be inflated!
If you can get it at a discounted price (ie 20 to 25% below valuation) it will be an added bonus. Some buyers agents are able to secure these
. I won't use this forum to spruik as I have a vested interest but email me if you want a referral.
What the............ no you do not want to buy off the plan......
A commercial property maybe....
Cheers,
The Y-man
Buying OTP is a strategy to be used in a 'rising' market. Even when engaged in, in that way, it still carries inherent risks:
1. The developer goes bust during construction - opportunity risk for you as your finance from the lender was tied to this project (even though not drawn down)
2. Contract has 'out-clauses' usually allowing the developer a change in 15% of the finishes - this can drastically affect the kitchens & bathrooms which are primary divers in end-value
3. The lender gets cold feet during the 1 - 2 year construction period and reduces your LVR - leaving you to stump up more cash out of your own pocket on settlement.
4. The RE market vals drop during construction but you are still forced to settle on your purchase at what is then an inflated price
5. If 4. occurs other purchasers like yourself may have to sell at fire-sale prices thereby reducing your property value even more (comparable sales in the same building)
6. If 4. occurs and you cannot settle you will lose your 10% deposit and get sued by the developer for any loses he makes on the re-sale to another purchaser.
7. If 6. occurs and you used a deposit bond and not cash for the deposit, the deposit bond issuer will be chasing you for the funds.
8. There is no guarantee that we are in a rising market atm. We may be? If you do this and make $'s it will be because you lucked out. This is not investing this is speculating and it carries a high risk.
All points 1. > 7. have actually happened - and I can give you examples if the above has not been enuf to convince you.
Suggest you find another way to fund your current IP cash flow shortfall.
All the best.
Your %$&*(#% crazy. Fix your cashflow problems before you even think about OTP.
How big is the cash flow shortfall? And what is the composition of the loan between deductible (IP) and non-deductible (PPOR)?
You could change IP loan to IO (if not already) to free up a bit of cash flow. And if you have some offset in the IP loan, move it to PPOR so you get a bit more tax deduction.
I've been burnt by OTP before (my very first purchase!). Although that was my own fault. Did not do DD so I overpaid. However you seem to know your area well (Richmond), and if you can spot a good OTP deal, go for it.