Firstly, by definition, buying off-plan properties is purchasing a property – typically an apartment – in advance to its completion.
Off-plan properties are usually sold before the construction stages actually begin, it would also be at a significant discount and often with smaller deposit requirements to that of other properties. As investment strategies go on, investing in off-plan properties can, therefore, be one of the most profitable out of them all, but of course, this is the case only when it’s done properly. Once you read this article and follow the 13-point checklist, then you’ll know exactly how to increase your off-plan investment profits.
If it’s the first time you’re considering the investment in off-plan properties, I am aware, it can certainly be intimidating. But let’s just say you’re purchasing at a very early stage (this is when you’re most likely to get the largest of discounts and the best choice of a plot), there may not even be a show home service for you to visit just yet. Therefore, it helps to be well educated and organised from the get-go. This 13-point checklist will outline all of the simpler steps when it comes to investing in an off-plan property.
Firstly, do rigorous research. You need to make sure you understand as much as you can regarding why off-plan properties can be so profitable. So, the best way to take the first approach will be considering all of the risks at hand and then acknowledge how you could lower the effects these may have on your investment.
When purchasing any sort of property for investment purposes, whether it be an off-plan property or an existing, if you don’t purchase in the right location you won’t maximise your profits. Believe me, it pays off to do all the research you can in the early stages and ensure your buying within the correct locations.
I’d hate to break it to you but sales agents are always going to come and go. Their job is simply to sell the property for the developer. On the other hand, a dependable property company works with a developer, but for you, the investor. So, make sure your working with a trustworthy and reputable company, with a long and successful track record of helping property investors such as yourself make fruitful off-plan purchases.
We’re talking about your money here! With off-plan purchasing, you pay an early deposit to secure the great investment, but you deserve to have some security over this money, right? You always need to make sure that your deposit is protected by some client money protection scheme because until it is complete and you have keys in hand, there is never an outright guarantee that the investment will complete. Long story short, protect yourself.
Ask the questions! What are you planning to do if the developer goes bust before completion? No clue right? Then ask, in what ways can I be protected? By doing so you’re growing your awareness immensely towards further risks and unintentionally cementing solid backup plans to ensure your investment doesn’t fall back on you.
Late completion of the construction works can severely dampen your investment plans. So, you need to be prepared by understanding clearly what happens if the development does face delays. Find out at the early stages, as soon as you can if you have rights to compensation, and what you should do about your mortgage.
Now, as your property moves closer towards the completion stages, the lending rules and the individual lender criteria can change. Let me give you an example, property prices may temporarily fall and this is only one example out of many. There are several different situations that could cause your lender to withdraw a mortgage offer, and you will need to know exactly what to do if this happens.
We’re talking about the law and your rights here! It’s absolutely essential that the contract between you and the developer protects both yourself and the developer. You need to be clear and be aware of if they allow the developer to change particular specifications, alter the completion date, increase the price, the list honestly goes on, but you get the idea. This can’t be done on your own, hence why you’ll need to acquire a great solicitor who is experienced within this field and is clearly aware of the potential risks of purchasing off-plan properties. This will not only put you in better hands making you feel safer, but it will also provide you with essential confidence and know how moving forward.
As we all know and may have been through it, various unavoidable life events can easily stop you from getting to the completion stages successfully, these might include losing your job, urgent emergencies and falling into bad health for example.
So, it’s really important to completely understand all the options that are open to you, alongside how to deal with particular life events as you progress towards completion. It never hurts to make a plan from the beginning if one of these may occur, that way if it does happen you’re not doubled up with the stresses of your investment alongside the stresses of the sudden change in your life. It’s better to be safe than sorry.
Developers might not allow you to sell before completion. So, you’ll ask the question, why would they do this? Should you actually purchase off-plan properties where no re-sales are allowed? Think about it.
This is key. Ensure that before construction is complete, that your solicitor double checks through the final contract again. It is extremely beneficial to do so just to ensure no material changes have been created that you were not previously made aware of.
This particular style of investment is a large commitment on your behalf and you’re therefore placing a lot of trust in the developer. It’s a sensible practice to make sure that the project is on track to complete as and when expected, so if you can visit the site, do so whenever possible. You will be able to record the current status of the project each time you do visit. If on the other hand, you can’t visit the site personally, you should have someone experienced and aware of the specifications of the development visit for you. It’s ideal that this individual is not only experienced in the progression of developments but more, in particular, experienced with off-plan properties and communicating effectively with developers.
Ultimately, the property company you’re working with should do this for you, so ensure from the beginning, just before you sign the contract that this is going to be something that’s allowed on a regular basis.
Finally, as you approach the final exchange and before this occurs, make sure you work through a snag list with the developer and ensure all outstanding issues have been dealt with by the developer. It’s as simple as that.