Buying Off Plan…
By buying a property off plan today you are securing the price of that property at today’s prices. By the time the property is completed it may very well have risen in value thus making you a significant return on
your investment immediately. Furthermore, if you can ‘just’ afford to buy at today’s prices you know that if you wait until more completed properties come on sale you may have missed the boat and have been priced out of the market. Buying “Off-Plan” is the most productive way to buy property for the investor in countries that are experiencing good rises in property prices. The earlier an investor buys a property on a newly released development the better, because this gives them the maximum amount of time between purchase and completion of the development. Within this period, often 3 years, the property will increase in value and on completion the investor has a brand new property ready to sell or rent, but it was purchased at a price well below the current market value. This gives the investor good potential Capital Appreciation. When you link Buying “Off-Plan” with “Gearing” (using someone else's money to fund your investment), Low deposits and in some cases no drawdown payments during the build, then the investment becomes even more attractive
If you buy off plan when the villa or apartment is at the drawing board stage or initial stage of build then you have the potential to make considerable input into the internal layout and finish of your chosen property. You can change around internal walls, select paint colors, tiles, carpets, kitchens, bathrooms etc., and custom design your property as though it were a self build but without having to pay the extra for an architect that you would if you were self building!
Developers usually require stage payments from their buyers throughout the build process. This means that you don’t have to make a large one off payment, you can save to afford each payment, you can budget to afford each payment and you are effectively securing a high value asset for a very low initial capital outlay. If you use a bank then there is no need for stage payments as the bank can advance the stage payments to the developer and roll up the interest payments to be added to the mortgage after completion.
Some investors buy property off plan never intending to pay for it and certainly never intending to live in it! They take full advantage of the stage payments method of funding the build and never make the final payment which is usually the largest; rather they put the property back onto the market just as it is about to be completed and take out all the profit from the natural increase in value the property has achieved throughout the period it took to build it.
Some developers use private investors to fund the build of holiday accommodation by offering them guaranteed rental yields on their completed property for a fixed period of time. This is a purely symbiotic and generally you will find that the developer has generally loaded the rental return into the price. Most developers do not have any relationship with the rental market.
