Buying off the plan is undoubtedly a leap of faith and the dangers are twofold.
First you have to believe that the property you can only see on a plan will eventuate exactly as specified within a certain time. If, like most of us, you do not find it easy to envisage exactly what you will get, it's probably worth getting help from an expert. Even if there is a display suite it may not be truly representative of the finished product.
Other precautions you should take include:
- Only buy from developers with a good reputation and whose work you can see.
- Make sure every detail is specified in the contract, including fixtures and fittings — for example, not just a stainless steel oven, but a particular brand and model.
The second major pitfall relates to price. It's difficult to establish whether the asking price is fair when there are no benchmarks. "Buy tomorrow's real estate at today's prices" is the spiel of the marketers. That assumes property prices always rise, which of course is not the case. For example, if you bought a unit off the plan three years ago in Cape Town's Camps Bay and are settling on it now, it is likely to be worth less than you are paying.
With investments be very suspicious of rental guarantees, which can be used to set artificially high prices. For example, if gross rental returns are 10 percent in an area and the vendor guarantees a $400 a week rental, that would price a property at $208,000. But say that market rent is really $350 a week, meaning it's only worth $182,000. If you fall for this you would pay 12.5 percent above market. The vendor only has to pay $5000 to guarantee the extra rental for two years and score an extra $26,000, or $21,000 net. Need some advise? contact Eestates today
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