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What to know when buying off-the-plan.


Buying a brand new property off the plan can be a bit daunting for some to fathom but most property investors know that these are some of the best, easy to manage, built to the latest building code, properties you can invest in.


Not only is the price fixed at the time of purchase. You also get the opportunity to buy into an exciting new development.


Tenants love new builds and with the emergence of short-term accomodation income providers such as Air BNB, they're usually great yielders.


However, not all developments are created equal, and the array of options on the market can be too many choices, or too expensive, or you never have really wanted to pursue the path of semi retirement by way of passive income or rewards from savvy investing.


10 things you should investigate before buying off the plans:


1. The pedigree and track record of the developer & the project team

You're backing them to complete the project, to the standard they’ve promised. Do your research, inspect other projects they’ve done before and have ongoing.


2. Do your research on the location, location, location

This is one aspect of investing in that makes all the difference in a good investment to a bad. Think about how close you are to local amenities, cafes, shops and education providers, public transport. What’s happening in the area? Is there gentrification going on - How much other development and investment is going on?


3. What do you like about this development?

Make sure you’re buying something with unique features, something you'd happily stay in, and something that you can easily rent. This includes size, quality, appliances, location, views and car-parking. Make sure you’re buying into something that will appeal to future tenants and buyers.


4. Is it built to minimum standards (NZBC), or have they gone above and beyond?

Make sure to sit down and take the time to carefully check over all the details - fixtures and fittings, bathrooms & kitchens, bedrooms, wardrobes, floor finishes, balconies, parking and communal spaces - .


5. Is there any soundproofing?

Will the properties have any sound proofing? The minimum standard in New Zealand is 55 STC (sound transmission class) and IIC (impact insulation class). Aim for above the minimum if you can - 65 STC/IIC is great and will make a huge difference to the enjoyment of your space.


6. What is the floor size and what do you think about the layout?

Make sure you understand how big your apartment or townhouse is actually going to be. Check the square meterage and calculate the room areas if you can. Remember this will include wasted space like hallways and cupboards, stairways. Sometimes furniture shown in marketing materials can be deceptive. Make sure you ask what size beds are placed in the bedrooms. Standard should be a Queen sized bed.


Bank lending requirements for an 65-80% LVR need to meet these minimum apartment sizes:

1 Bedroom 45m2

2 Bedroom 55m2

3 Bedroom 65m2

Less than that and we would only lend 50%


7. Choose your outlook carefully, do you have good sunlight hours?

Are you going to get plenty of natural light? What is the properties geographic position to the afternoon sun? Will your apartment be blocked by a future development? Do you want views? If so, city or water? Think about these things carefully - you can’t change a view.  Obviously the price will increase as the view gets better and if you get a good one you'll be in the money come your future sale value.


8. Do due diligence on the body corporate fees and rules.

Make sure you thoroughly investigate the body corporate; check that the annual fees are realistic and will cover expected maintenance. READ THE BODY CORPORATE RULES - there may be restrictions on pets and how you use areas of the development, types of leasing / tenancies you have at your rental disposal.


9. Triple check your sales and purchase agreement + Seek proper legal advice

It is always recommended that you seek independent legal advice. Make sure you pick someone who actually knows about property or construction. Make sure to ask for an estimate or breakdown of fees. You will require a lawyer to assist in the transfer the property title into your name so you might as well get in contact with them earlier than later.


If you're thinking about signing any agreement before discussing with your solicitor, make sure there is a solicitor's approval clause in the contract, and if not, ask for it to be inserted. You may also want to look and see if there is any due diligence or finance clauses stated in the contract.


Ask where the deposit will be held, what happens to the accrued interest, what is the length of the conditional period, is there a vendors sunset date (when the development has to be finished by) and what happens if extra time is needed?



10. Security and safety - Seek finance / insurance quotes and tentative approval


To purchase a property off the plan, you tend to only need a 10% deposit if you're a resident, or 20% deposit if you're an overseas resident applying for Overseas Investment Office (OIO) approval.


You'll have to understand that obtaining finance approval for off-the-plan property investments can sometimes be near impossible. Banks will not provide any approval outside of a construction completion timeframe over a year and can tend to not provide approval on any development outside of 90 days of completion!


Loan to value ratio (LVR) lending on standard apartments tends to be 65-80%

For this LVR they would need to meet these minimum apartment sizes:

1 Bedroom 45m2

2 Bedroom 55m2

3 Bedroom 65m2

Less than that and we would only lend 50%


Apartment inside of a management contract is classed as a Commercial Property with likely have a 15 year max term and possibly only 50% LVR allowed.


We recommend that you seek assistance from an experienced mortgage broker with good references and or history. They can be the difference between an additional 10-20% finance and sometimes get you even better interest rates than what you would directly. Best part about it, they typically are paid their transaction fees by the bank for making the transfer of required legal and banking information streamlined for the banks regulations and approval.


The same scenario has started to be the norm with insurance providers so it is important to engage the services of an insurance provider or get to know your local insurance managers. To make it easier to obtain, be sure to ask about security and safety features, such as sprinklers, fire escapes and extinguishers. Make sure the developer isn't cutting corners.



Finally in summary

We too are sometimes investors in off-the-plan projects and investment properties so make use of our experience in new development and construction and let us help you find great opportunities to invest your hard earned funds in. We like quality, low maintenance, long term investments and hope you do too.


If you'd like some more information on off-the-plan properties, please feel free to make contact with the Property Investments team.


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Level 6, 36 Brandon Street Wellington New Zealand 6140

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