Thoughts on buying "off the plan"?

Im new to the investment scene and have been getting advice from someone whose current favoured strategy is "buying off the plan", i.e. buying apartments before they are finished being built. He has had obvious success in following this idea over the last three years, in and around Sydney, but he has only been investing for that period, and it would seem like you would have had to be moronic not to have done well in that boom period.

Does anyone have much experience with this type of investing, and have any ideas of its advantages and disadvantages vis-a-vis other possibilities?

Cheers

geoff
 
Well, quite simply, I think you are going to find that some people feel comfortable buying off-the-plan, and some do not. Yes, any moron probably could have made big wins buying OTP a couple of years ago. Today might be more of a gamble.

But remember, those who bought 3 years ago didn't have a crystal ball, so they were undoubtedly lucky, but presumably they felt they had secured a reasonable deal at the time.

You are placing a lot of faith in the hands of the builder to supply you with a quality product, because when you buy it is sight unseen. Due diligence probably becomes even more critical.

I've seen OTP developments where there are clauses along the lines of "plan dimensions are approximate only and variations from these dimensions shall not be sufficient cause to rescind the contract". My point is that you are open to these kinds of shenanigans.

Lotana on this forum has raised issues about the building he has bought into has a narrow entry door - so narrow you can't get a couch in!

On the other hand, buying OTP is not much different to engaging a builder to build a standalone house - once again you're not sure what the final quality will be like, and you need to rely on perhaps the builder's reputation and display homes to reach a conclusion. In an apartment complex, you probably have more issues such as noise transmission through walls/floor/ceiling, ventilation, heating/cooling effectiveness, etc. And the display suite is usually not the exact same arrangement as what you are buying, so how well the space "works" or not often can't be determined.
 
Thanks Kevin

That has cooled my heels a bit and made me realise that I should look more carefully at many IP aspects that I hadnt been considering. I also got some useful insights from another recent thread :

http://www.somersoft.com/forums/showthread.php?s=&threadid=7595

This reinforced my main concern with OTP - trying to assess the "real" value of an as-yet non-existent property .

One of the outcomes has been that, faced with an unfamiliar IP path, I realised how little I knew about more traditional property purchases, and I think I understand these a bit better now too.

cheers
 
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