Off-Plan Property
Buying Off-plan property is risky!!!…..Yeah you read it right, it is risky. But before we proceed let’s look at what an off-plan is?
Off-plan means buying or selling of property before it is completely built or constructed.
Property investors purchase off-plan property with the aim of making substantial capital gains. This financial return may occur because developers who sell off-plan property often offers financial incentives or discounts to early investors.
Risks Involved in Buying an Off-plan Property
There are three major risks involved in investing in an off-plan, which are:
- Construction Delays – In buying an off-plan there may be an unexpected delays in the construction and if this happens, it may affect your investment plans.
- Developer Bankruptcy- Another risk involved in off-plan is if the developer you have signed the contract with goes bankrupt. If this happens you might not get your deposit back, depending on the terms of your contracts.
- Development Quality- Since you do not get the chance to see the property completely built though still under construction, It is possible that the finishing including the interiors and exteriors may not align with your expectation.
However, there are lots of benefits involved in investing in an off-plan when you invest right.
Benefits of investing in an off-plan
When buying property as an investment, it’s important to look for two key attributes which are; High Return on Investment (ROI) and Capital growth, this may be easily achieved when purchasing an off-plan.
They benefits include;
- Low Purchase Price- One major advantage of buying an off-plan is the ability to secure the purchase price below market value. Some developers also offer additional discounts for investors purchasing multiple properties at once as an added incentives.
- Capital Growth- Those who purchase off-plan benefits mostly from house price growth. For instance, If a property is purchased in 2015 but is not due for completion until 2017, when the property has finally been built, they would have seen their property grow in value each year. This can add tremendous value to a property, especially if it has already been purchased at a discounted price from the outset.
- Ability to Re-sell before Completion- As it is more than likely that your property will go up in value before completion, investors can choose to put their property up for sale and sell at a higher market value. This can be a good strategy for investor looking to make profit quickly.
- Small Deposits and Staged Payment- Depending on the developer, some off-plan have added advantage of staged payment (installment) and enable investor to purchase a property without a significantly large deposit.
How to avoid the Risk Involved in an off-plan Project
There are three major ways to avoid the risk involved in an off-plan and ensure that your investment is a secure one. They are:
- Research– Search on the prospective area you are looking forward to invest in. Off-plan investments are preparation for the future of an area, and so you want to make sure it is worth your while. Hence look out for the property value growth in the past years, in other to get a significant return on investment (ROI) in years to come.
- Developer’s Track Record– Before buying an off-plan property look into the developer’s track record in other to get an idea of the quality of their project and how long it took to be completed. This will give you the credibility of the developer.
- Contact a Real Estate Consultant– A competent consultant comes in to give you the best real estate advisory on your investment plan and research for the fast growing areas with high return on investment (ROI) and also connect you to potential developers with the best track record.
REFERENCES
- Gustavo Calero Monereo (2013) Legaltoday.com
- Milligan Brian (2013-08-03). “The risks of buying a home off-plan.
