Buying off the plan 101

Essentially, buying ‘off the plan’ is when someone purchases a property before it is built. The developer secures a 10% deposit (in most cases) from the purchaser and uses that capital to secure a building loan from the bank to commence construction. The final payment is not due until the settlement process.

If you are looking at, or researching into purchasing off the plan, you will come across some frequently used terms. Below are some of the most common terms and their definitions:

Deposit
The deposit (usually 10% of the agreed price) is paid by you to the developer in order to secure your chosen apartment. The money is usually held in a trust account by the developer’s solicitor. Payment is made upon the exchange of contracts and paid via a cheque or funds transfer.

Settlement Period
The settlement date is usually decided as a certain number of days after the registration of the Plan of Subdivision or Certificate of Occupancy. From this stated date, the new owner can move into the property.

Inclusions
These are items that are to be included in development of the property and are stated in the contract. This may be things such as dishwashers, fridges, cook tops etc.

Special Conditions
Anything you negotiated as additional conditions to the sale will be listed under a Special Conditions section of the contract.

Capital Growth
The amount of value the property has grown by over a period of time.

Gross Rental Yield
The calculation of the annual rental income as a percentage of the purchase price before expenses are deducted.

Vacancy Rate
The percentage of rental properties that are available out of all properties in the selected group. Often used in groups of agencies, suburbs and cities.

Service facilities
Certain utilities and service areas that are included to ensure the building keeps operating.

Common Walls
Also known as party walls, are the dividing partition between two units that is shared by both tenants/occupants.

Owners Corporation Fees
Ranging from a few hundred to a few thousand dollars a quarter these fees are paid by the owners to cover building management and regulation costs. Generally, these fees are higher if the building has additional amenities such as pools, lifts and gyms. The fees and levies are decided and assigned by the Administration and Sinking funds.

For more information or if you have any questions, please contact us. 

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