Investing in Off-Plan property
What is off-plan property?
Off plan is a term used for property before a structure has been constructed upon the land, a piece of land pre-constructed on.
Developers tend to use agents to market the off-plan development in order to sell to investors with the aim of making capital gains by either selling it on once it has completed or renting the unit in order to make rental returns.
Why invest in off-plan property?
Investor’s buying off-plan means they normally get a discounted purchase price at today’s value, once the development is completed it tends to normally appreciate in price during stable market times.
The sooner an investor reserves a unit the better as this means they have first pick at all the units available, selecting the best unit will always make it more attractive when it comes to re-selling or renting it on further down the line.
As with any investment opportunity off -plan property is not without risks, we ask all our clients their objectives in wanting to invest in this type of opportunity and advise on any risks involved.
There are a few strategies we recommend to all our clients in order to minimise risks:
Are there any risks in investing in off-plan?
There is always a risk when investing no matter on location or what type of investment, property tends to be a mid to long-term investment, however off-plan can create a short -term investment opportunity should it appreciate on completion, this means the investor can then sell it on straight away making instant capital gains.
Do your research on the areas and markets you would like to potentially invest in, are you looking for high capital growth and strong rental yields? If so, look for areas with good foundations and infrastructure plans.
Do your research on the developer, who are they? What have they delivered in the past?
Any reputable developer and agent will answer all questions you may have making you feel comfortable from the very start.
• What happens if the completion date is delayed?
Do your research and always buy from developers with a good track record, there are many factors which can cause delays in off-plan developments such as weather conditions, issues with the build or land, contractors etc, this is why there normally tends to be a long-stop date within the contract, this allows the developer some time over the estimated completion date in case there are any unforeseen delays with the build.
Instruct a solicitor who has worked with this type of purchase before and therefore has more knowledge than one who hasn’t, they will be able to review the contract and report out to you accordingly, they should inform you of any clauses, penalties and long stop date details.
- Know your objective.
- Do your research.
- Choose a trusted developer and an agent who will guide you throughout the whole process: from the purchasing stages all the way
- Due Diligence -Instruct a reputable solicitor who has knowledge and understanding on such developments/purchases.
- Ask as many questions as you like – any reputable developer or agent will help you no matter how small your query may be.
- If you’re thinking of buying an off -plan property you should weigh up the benefits of this type of investment against the disadvantage of not using a buy to let mortgage. For instance, off-plan investments are offered at below-market rates which means you have less to pay for the investment. There’s also the benefit of added capital growth that you can often gain from an off-plan investment.