At VARO we often have clients (particularly current Landlords) who ask us for our assistance and professional opinion on investing in off-the-plan projects. We believe that the savvy investor needs to clearly understand what is an off-the-plan purchase and how they can contribute to their investment portfolio’s success. We have created a list of positives that can help determine if an off-the-plan purchase in the key to your investment strategy.
Lower Maintenance Costs
This is an obvious one but investing in new property reduces maintenance over time as they will require less updates and renovations. Also, if buying off the plan, features and fittings will be covered by warranty for some period of time, thus making it easier and cheaper for you to maintain. For landlords, spending time personal time on the maintenance and renovation of an investment property can directly impact its profitability. By purchasing a new property, you can alleviate the time and any additional money that would have been spent on maintenance.
Buying a new property allows you to update the property’s specifications to install energy saving and efficient measures from the outset. This makes it eco-friendly as well as more cost effective. Making for smaller electricity bills saving tenants money, an obvious positive for potential renters.
Higher Claimable Depreciation
New properties are going to have a larger depreciation rate and value than older existing properties. When you own an investment property, you should treat it as a business and this means getting serious about tax. The higher the claimable depreciation, the more you can save in tax and this can make a big difference to the financial performance of the investment.
Better Quality Tenants = Better Rental Yields
In our experience, high quality new construction attracts a higher quality of tenants which means two things; higher quality tenants are more likely to take better care of the property and are more likely to pay a premium rent as well as sign longer term leases.
Growing Areas for Fantastic Capital Growth and Resale Prospects
Off-the-plan or new properties are often found in high growth areas with prospects of population growth. This means a few things for investors. Firstly, as a landlord you can expect that the property will never have vacancy issues, meaning that it will generate a steady cash flow. Secondly, they are likely to improve capital value as the area grows and becomes economically successful and finally these two factors create fantastic resale value and prospects. This means that when you eventually sell the property, you are likely to make a profit.
Builders can sometimes offer incentives that allow an investor to limit their cash out of pocket investment to just the initial deposit. There can also be incentives offered towards stamp duty, rates and other purchasing fees that may arise.
Convenience and Faster Turnaround
When you settle on a new property, you can easily swap the developers ‘For Sale’ sign into a ‘For Leased’ sign the very same day. With an established property, chances are you may need to do some cosmetic fixes, and no matter how simple they may be, they do take time and time away from the property being marketed and shown to potential tenants. Therefore costing you money.
With an off-the-plan property the overall process is much more seamless for the investor and can begin generating an income almost immediately.