According to Wiki, off-plan property is a property before a structure has been constructed upon it. Pre-constructions are usually marketed to real estate developers and to early adopters as developments so that the purchaser can secure much better finance terms from their lenders. Read this article to learn more
Ever seen a great-looking image of a property and an even better-looking price? Chances are that it’s probably an off-the-plan sale.
Buying ‘off the plan’ basically means entering into a legally binding contract to purchase a property before it reaches the stage of final development and occupancy approval. So in other words, you are buying a promise – a promise that the seller will complete the development of a property in accordance with agreed terms.
Property investors or property speculators like to purchase property in this way in the hope of making substantial capital gains. This usually occurs because developers who offer property for sale off-plan, often offer financial incentives to early adopters. Usually this comes in the form of a discount in response to the sale plan. Furthermore, there may be ample opportunity for capital growth in a rising market and with a development cycle of typically 12–24 months.
It is important to note that for off-plan property to be attractive, there must be a high level of other infrastructure in the immediate area either already built or due to be built within the next few years.
In a rapidly rising housing market, buying off-plan enables investors and home buyers to buy a property at a lower price than if they wait for construction of their chosen property to commence. In addition, buying off-plan may be the only way to get a property with a specific location or set of features as choice may be limited once construction starts.
Buying properties off-plan offers a range of advantages and has delivered excellent results for some investors. But at the same time, buying off-plan carries a number of disadvantages and risks. These must be weighed carefully against the advantages in order to decide whether an off-plan property investment represents a good opportunity.
Advantages of Off-Plan Property Investment
One of the biggest advantages of buying a property off-plan is that it gives you more control over fittings and décor. This allows you to ensure that all of this is completed to the exact standard you desire, as well as to boost the property’s value and appeal with any particular added fittings you have in mind.
It can also be useful if prices are predicted to rise significantly by the completion date. It can allow you to get in early at a lower price, secure the property with a deposit of around 10%, and later benefit from a brand new build which has already worth more than you are paying for it.
Having your property secured before completion also gives you more time to form plans on how to use your investment. By the time it is completed, you should have had time to form a pretty good idea of how you will secure the very best returns and be ready to put your plan into action more or less immediately.
Disadvantages of Off-Plan Property Investment
Most of the disadvantages of investing in property off-plan come from risks that do not occur when purchasing completed properties. For example, the uncertainty of the property market itself is a key risk factor. If property prices fall between the date you agree the price and the completion of the property, you will have already lost money on the date of purchase.
The risk of delays will also be greater than when purchasing a completed property. These will generally be an inconvenience rather than a deal-breaker, but nonetheless delays can be far more significant. It is possible for the building process to be delayed far longer than the purchase process of a completed development could ever be.
Another risk factor is that you will lose out if the developer goes bust before the build is completed. If you have already paid your deposit, you are likely to lose it and have no property in return.
Regardless of your fears, if you really want to excel as a real estate investor, buying properties off-plan is your best bet. This is where your risk taking abilities kicks in.