Buying an investment property off-the-plan comes with many benefits, but when you make any major investment, you need to do your research before you make a commitment. This is why we’ve put together this brief article outlining why buying off-the-plan properties is the #1 choice for savvy property investors.
#1 Depreciation benefits
If your investment strategy is to buy off-the-plan and you intend to lease your property to renters, you may be entitled to significant tax deductions. A new property will give you more benefits than an established property when it comes to making depreciation claims because an established property will already have depreciated. Once your property settles, make sure that you hire a quantity surveyor to give you a full depreciation schedule, which will make it significantly more straightforward for you to claim deduction on your property’s fixtures and fittings once the tax year ends. Increased depreciation means that you can lower your holding costs as the government will cover a larger portion of your property’s expenses. The Australian Taxation Office (ATO) permits investors to claim deductions for maintenance and management costs, which includes any interest on the loan for your current annual income over several years.
#2 Buys time for buyers
Purchasing an off-the-plan property is one of the simplest ways to enter the property market. All you need to get started is a 5% deposit (under the first home loan deposit scheme), and you can pay the total purchase price as soon as construction is complete and the property settles, which can take up to two years. You can use this time to save money to put towards furniture and moving costs. As you have time to accumulate some savings, you won’t need to borrow as much to cover your purchase, which will significantly reduce your loan repayments.
It’s also common for capital growth to increase the value of your initial deposit during the construction period. However, you should be aware that the opposite can occur and the value of your property can decrease between the time you pay your deposit and the settlement period. This is why it is essential that your property has qualities that make it resistant to market cycles, such as an excellent location, plenty of natural light and good design.
#3 Strong potential for capital gains
Buying off-the-plan gives you the opportunity to buy a property at its current price. In a fluctuating market, this usually means that by the time you move in, you will be in possession of a property that is worth far more than you initially paid for it. Of course, there is an element of risk associated with this, as the property could always drop in value rather than increase, but it could increase by as much as 30%.
New buildings usually require minimal upkeep and maintenance, and before you chose to settle, you will already have inspected the property for any damage or defects and anything that needed to be fixed would have been done. With an off-the-plan purchase, you can hold a new property at a low cost for a long period of time, therefore maximising the total capital growth.
If you would like to know more about the benefits of buying off-the-plan, get in touch with our team today. Simply email: team@jrprosperity.com.au or call: (02) 9635 1991 if you have any questions about investing in the property market. Alternatively, you can book a free virtual coffee meeting where we will answer any questions that you have and identify your opportunities to get your foot on the property ladder. Visit: https://www.jrprosperity.com.au/coffee to book your free virtual coffee meeting now.
