Make your investment go to plan

By ANNE GIBSON property editor

- An apartment goldrush tempts many investors to buy off the plans to get a foothold in the CBD, so we sought advice for prudent buyers.

The $3 billion of apartments being built in Auckland are tempting investors.

Many are thinking of buying some of the 4000 units now under construction off the plans, aiming to take advantage of what they see as an opportunity gap - the price difference between when a unit is planned and when it is finished and rented out - and to get in before others snaffle all the apartments.

But before they part with the readies, investors should make sure a few questions have been answered.

We sought the opinion of Tony Gapes of Redwood Group, one of Auckland's more active apartment developers, who has sold many of his proposed 17-level Scene apartments off the plan.

Two blocks are being built on the waterfront on reclaimed land behind the old Oriental Markets in Quay St, and Mainzeal Construction has started work there.

A Redwood spokesman said deposits had been received on 80 units in the first block of 126 at Scene and marketing of the second block of 102 units had just started in Britain.

Gapes has struck weathertightness problems with some other developments which he sold off the plans but says Scene will not use any timber.

Problems have arisen at his 65-unit Silverfield Terraces site in St Lukes (leaking badly after just 16 months) and the 97-apartment Eden Two site in Mt Eden, which has rotting balconies.

Gapes has a checklist which he thinks apartment buyers should keep handy.

"I think there are a few points to look out for when purchasing off the plans," says Gapes, who sold about 180 units in such a way for his Mt Eden developments.

"First, specifications: these need to be detailed enough so that all the building materials are specified.

"If timber is used in the exterior cladding this should be treated and not just kiln dried. Get these checked out by a builder if unsure.

"Secondly, scale plans: the purchaser should ask for a set of scale plans and check that all the rooms are an adequate size. The best way to do this is to compare them to rooms in a house that is already constructed.

"Third, reputation of the developer: when you buy off the plans there must be a certain level of trust between the developer and purchaser that you are going to end up with a good level of finish.

"The best way to check this is to obtain a list of the developer's previous developments and go and have a look at them. Key things to look for are the standard of finishing, the amount of landscaping, etc.

"Fourth, reputation of the construction company: because most developments are built by a main contractor employed by the developer, a purchaser should also check who is building the apartment and again go and have a look at buildings they have built before.

"Fifth, the financial stability of the developer and construction company: you need to know that if there are any problems with leaking or other issues down the track, the developer and the construction company will be around in a few years time to fix these."

Financial advisers recommend a split of investments and a spread of risk, so that an investor might hold property, shares and cash.

If an investor's only asset is their house and they are buying an apartment, most advisers would say this is a heavy weighting in one asset class. They would encourage diversification.

Others in the field suggest the following could be a start in developing a list of questions when considering apartment plans or visiting a showroom or display suit, before paying the deposit:

* Is what is promised exactly what you believe you are buying?

* Who is the developer and what other buildings have they built?

* What on-going fees such as body corporate costs will be due?

* Has resource consent been granted for the development?

* If not, could plans be changed to meet rules on height, vehicle access, design, balconies or views?

* Could views be obscured by another development? The small sheds next door could be replaced by a tower only 1.5m away. This has happened in Auckland.

* Seek help from professionals such as a valuer, lawyer or accountant.

* Is the display suite a replica of what you are buying?

* Is the floor plan an exact plan of what will be built?

* Is the display suite the same size as the apartment or has it been enlarged?

* Does the unit have a carpark? Where will guests or visitors park?

* Can you sleep in the inner city or will noise be a nuisance? What insulation exists for windows and walls?

* Can internal alterations be made or are there restrictions?

* Is the land leasehold with ongoing fees or freehold and no ongoing costs?

* What zoning exists and could this allow activities which could be annoying? Perhaps that innocuous-looking fish processing plant next door starts up in the small hours of the morning. Maybe the shops which seemed so handy receive deliveries until midnight.

* Does the nearby nightclub rev up the bass on the amplifiers in the intervening period, say around 3am - just before the fish people start work?

* Will a deposit be refunded if the deal is cancelled by either party?

* Has a lawyer looked at the contract and title to the property before the deposit is paid?

* Has a land information memorandum (LIM) been sought before settlement?

* What does the contract say, especially about what will be built and how it could differ from what is being sold?

* Will you get your money back when you sell, or could there be aspects which make the property less desirable?

* Has a comparison been made of other prices and amenities?