Buying A House Off Plan –
Protect Your Investment

  Buying a house off plan can be a viable option for growing your financial and investment portfolio.

Buying a house off plan can be a viable option for growing your financial and investment portfolio.

You may be investing your money as a homeowner or you may be looking at financing investment properties – either way, you need to protect your return on your investment.

Do your research thoroughly, consider the pros and cons of investment in rental property and take note of the how, when, where and why of purchasing your home or investment property off plan.

Buying a House Off Plan

What It Means?

Buying a house from plans means that you will purchase the home or sectional title unit before it has been built based on architectural plans and an artist’s impression of what the final building will look like.

Who Buys Off Plans?

You generally get two types of buyers:

  • Homeowners who would like to buy a property that they are planning to live in.
  • Investors who are looking to purchase a house or sectional title unit as an investment property, either for re-sale purposes or to generate a rental income.

Why is it worth considering?

  • The deposit is generally low and can thus be an affordable option.
  • The bond/mortgage repayments are staggered and thus you have more time to manage your cash flow.
  • You make an offer at current market prices and these prices may then appreciate, so that by the time you take final ownerships of the property (and all the accompanying financial obligations), the capital value of the property may have increased.
  • You are more than likely not expected to pay transfer duty if you buy your unit directly from the developer.
  • Some developers may even cover the costs of the registration fees.
  • Developers are likely incorporate modern architectural designs that are aesthetically pleasing, thus encouraging universal market appeal and a better likelihood of finding potential renter or buyers in the long term.
  • Innovative and technologically advanced building materials and processes may be used to maximize the longevity of the structure.
  • Maintenance overheads are postponed initially for three or four years as opposed to buying an older home, with pre-existing maintenance concerns.

General Red Flag Alerts When Buying A House Off Plan

  • Don’t pay the deposit for the stand/unit/home, or even sign any contract to purchase until you have thoroughly verified the credentials of the builder or developer.
  • Confirm that the developer has a credible reputation and a proven track record, as well as being registered with the appropriate building authority or board.
  • Personally go and see other developments that your proposed developer has built and speak to, amongst others, individual tenants or owners and body corporates residing in completed units that are at least three to four years old.
  • Don’t pay any money directly into the bank account of the developer or the builder.
  • Instead, make payments into the trust account of an attorney or alternatively the trust account of a registered estate agent.
  • Do not take occupation of the unit or even possession of the keys until: 
  • -you have submitted in writing a final list of everything that is still wrong with the unit;
  • -and every aspect has been fixed to your satisfaction.
  • Do not take occupation until you have verification that an occupation certificate has been issued by the required statutory authority.
  • Be aware that you may need two loans (if the unit is not sectional title); one for the stand and then one for the actual building structure.
  • You will probably need to get a building loan.
  • You will be expected to pay the developer/builder in instalments.
  • These instalments are paid out at certain time once a particular stage has been reached in the building process.
  • Your financial institution will verify with you that you give your permission to release the money for a particular instalment.
  • Go to site before hand and verify that you are happy with the building progress and standard before the money is paid to the developer.
  • If there are any problems, make sure that they are rectified before you give your financial institution permission to pay.
  • Be aware that you may lose your deposit if the development is not finished due to permission not being granted by local statutory authorities for any legal requirements.
  • If construction exceed the projected due date for completion, you may incur cost when you need to find somewhere to stay in the interim.
  • The longer the development is delayed, the more likely it is that building costs my escalated, so make sure that you have a watertight contract to protect you from being liable for escalating building costs.
  • Find out if you are liable for any estate agent’s commission and any other costs (regardless of how big or small they are) that you will be liable for.
  • Make sure that you are fully informed upfront what the financial penalties will be if you withdraw from the contract for any reason.
  • Be realistic – while the “package deal” may sound like a good deal, transfer costs and registration fees will have been included in the overall price somewhere along the line.
  • Remember that you can’t actually inspect the structure that you are buying beforehand.
  • It is therefore important that you fully understand what the square metre on a plan will look like in real life.
  • It is equally important to know exactly where the proposed home will be in relation to main roads, proposed infrastructure developments in the future and surrounding influences.

Please remember to double check when buying a house off plan that you have completed a comprehensive and detailed  “problems to fix” checklist for buying a house in writing.

Make sure that all the problems have been fixed before you take occupation.

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