No, not really. Though a rising market may be more forgiving, in light of points 4 and 5, you’re often still better off buying an older property on a larger block. Find a problem property and provide the solution. Buying off the plan is buying a solution. As Steve McKnight says, “The farther away you are from the problem, the farther away you are from the profit.”

Hope that helps.

Jason

If I were to re-write this article again after the latest budget announcement, I wouldn’t change a thing. The same fundamental problems exist when buying a new property:

1. There’s only one way to make money – generic capital growth. Your cash flow will likely be negative and you’ll have no immediate manufactured growth potential. There are no problems to solve as the developer has already chopped up the land as small as possible.

2. You’re paying too much for a building and getting too little land. It’s land that appreciates. Buildings depreciate. Why not buy a less expensive dwelling on a larger block? Long term, you’ll likely achieve more capital growth with more land, all else being equal.

If your property purchase only stacks up with a depreciation benefit, then something is wrong with your investing strategy. We invest for profit, not for a tax benefit.

I’m sure all the salespeople for builders and developers will disagree.

Hope that helps.

Jason

Should potential investors, like me, considering purchasing there first investment property after 1 July 2017, now be considering OTP given we can’t claim depreciation on existing dwellings?

Thanks

Sitbon

Before I respond to your other comments, perhaps you can help me understand exactly what you mean…

What do you believe the “pros” or “positive notes” of buying a brand new property are?

How exactly might buying off-the-plan be “the only option in an area you can afford”?

Looking forward to your response :)

“be great to read some positive notes on both sides as I feel reading some of these articles are very one sided and if you didn’t know better or do your own research you would be put off quite quickly and miss out”

If this were a general property forum, then there may be a host of first-home-buyer members who are very happy that they bought OTP and now have a house to call their own. But, as the website name suggests, we are more focussed on property “investing” – thus, our slant is more in that direction.

I guess the question in my own mind is “If Home Buyers didn’t buy an OTP home, what could they buy instead, and would they get a better deal with a non-OTP purchase? From my experience, I side with Jason – the OTP market serves a purpose, but it doesn’t particularly serve the buyer that well.

Like negative gearing, OTP may suit some people, but far from ALL people. And, for most investors, the OTP offerings are so full of negatives when compared to purchasing second-hand, that it is natural to assist new investors by highlighting some of the traps that are out there. The OTP sales arena has more than its share of traps.

Be sure we are doing this to help you (the reader) avoid some of the less obvious problem areas. OTP is one such area from an investing standpoint, generally speaking. I’m sure there might be some occasions when an investor CAN do well with OTP – like buying the last property in an estate that the developer has massively discounted so they can move on to their next estate. As Jason mentions though there are several “problem areas” that any investor MUST be aware of, if they want to remain out of trouble.

And if you have some success with OTP, we are always looking for other points of view to come share with us. Investors grow more wise as they hear more from other investors. So stay around and share, Rebecca – you are most welcome here,

Benny

I agree with this article but also if it was all that bad the house and home package would fall on its back and wouldn’t be booming as much as it is now.

I feel whichever way you go there are always pros and cons no matter what. someone will always be unhappy.

it would also be nice to if you showed the other side of successful off the plan buyers, so the picture you’ve painted isn’t so scary and negative to people looking at doing this.

in the end homes do have to start somewhere as well, so buying off the plan is sometimes the only option in an area you can afford.

be great to read some positive notes on both sides as I feel reading some of these articles are very one sided and if you didn’t know better or do your own research you would be put off quite quickly and miss out

Thankyou
Rebecca

If it was a more expensive structural reno, he could have included a clause in the contract covering himself. In this deal, the vendor assumed greater risk and required a condition that Soumen would have to finish the reno if he failed to settle.

When agreeing on early access, always have a solicitor check the contract before signing.

Let’s see what Jason suggests – and I’ll be checking back for the answer too…. :p

Benny