Advantages of Buying off the Plan Melbourne (VIC)
Buying off the plan and property investment guide...
Smart property investors have long recognised the benefits of
buying off the plan in Melbourne. Melbourne has the second highest population in Australia and one of the lowest vacancy rates which has resulted in high rental returns and yield and strong capital gains for shrewd investors. Here are seven good reasons why you should consider buying a property off the plan in Victoria and adding to your investment portfolio.
Great tax benefits
Tax incentives are a major incentive of buying a Melbourne off the plan investment property as new apartments usually provide a higher rate of depreciation than houses or existing buildings. We provide depreciation schedule for our
Melbourne investment properties where possible. Any legitimate expense incurred in the running of your investment property such as property management fees, owners corporation fees, landlord’s insurance and building and structural improvements are also tax deductible. You should always seek advice from a financial adviser or accountant before committing to an off the plan purchase in Victoria.
Stamp duty exemptions
Stamp duty savings are a major driver of why property investors buy a property off the plan in Victoria. The percentage of the stamp duty exemption will depend on what stage of development you have bought the property in Victoria. If the property has started development, you may have to pay a pro rata stamp duty amount. The concession is always greatest if the property is bought before construction commences. When purchasing a Melbourne investment property, check with the
Office of State Revenue in Victoria to establish the exact entitlement you will receive which will also depend on the initial purchase price.
Potential for capital gains
While there is no guarantee your property will gain in value over any given period, and capital growth largely depends on where and what you buy, historically real estate in Victoria experiences steady growth over the long term. With a prolonged settlement, your investment property may experience huge capital gains from the time you have signed the contract for the property to final settlement. Bear in mind however that if prices fall, you also have to wear that risk but investing in property in Melbourne should always be a long term investment. There is also the option to resell your investment property before, during or after construction which gives you added flexibility if the market falls.
Instant equity
A major reason why astute property investors
buy properties off the plan in Victoria is because the delayed settlement can result in instant equity as the property grows in value over time. In simple terms, equity is the difference between what your home is worth and how much you owe on it. So if you purchase a property off the plan in Victoria and it is worth $750,000 when you first purchased it but is valued at $810,000 upon completion, you have an instant $60,000 in equity. This equity can be used to create wealth and add to your existing investment portfolio.
Buying time
When buying an off the plan property, in most instances you will put a small deposit to secure your property and pay the balance when the property is built. The delayed settlement allows you to buy the property at the current market value but save a larger deposit which is a major drawcard for property investors.
More options
When buying off the plan, you may have a greater choice of properties depending on how many properties has been sold by the developer. Your options may include a courtyard, garden or balcony, additional parking or storage or positioned on a higher floor. Properties with a superior floor plan, views and positioning can offer better potential for capital growth and maximise rental yields. You may also be able to choose from a range of high quality finishes, floor furnishings and appliances to make the property even more tenant friendly.
Lower maintenance costs
A new property means lower maintenance costs as the painting, fittings and appliances will all be brand new and not have as much wear and tear as an existing property. A new property will also not require any large maintenance costs that may require a special levy such as painting common laws, major landscaping or replacing the carpet in stairwells. Newer properties also have increased insulation, energy-efficient heating and cooling equipment and use substantially less energy for heating, cooling, and hot water heating making the property tenant friendly and saving tenants money on utility bills.
Buying a property off the plan in Melbourne can potentially provide you with instant equity, high capital gains and a high rental return and gross yields. Do your research and find a developer that is reputable, licensed and will deliver what they promise on the glossy brochure. Projects that do not proceed or start late, projects that do not deliver the rental returns you expected, capital growth projections which fail to meet expectations or fall well below the mark, developers who experience financial difficulty, bankruptcy or even liquidation may hold up the project’s completion as well as jeopardising your financial investment.
Find Investment Property has listings for some of the best off the plan properties currently available so start searching to find your next property deal and add a Melbourne off the plan property to your investment portfolio.
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