Quick Guide to Buying Off-plan
Welcome to the world of property investing and being a possible landlord. You have plenty of lots and buying options to build up your property portfolio. One of these options is to buy off-plan.
But what exactly is buying off-plan?
Buying off-plan, or off the plan, means that you are purchasing a property before it is built in anticipation that it will be finished and you can sell or rent out the space at project finish.
This method of property investing is a fairly simple way to bulk up the number of properties in your name so long as the project finishes.
Photo Credit: The Property Agent
Risks of Buying Off-plan
Like any buying option or other investment strategy, buying off-plan does have its drawbacks to consider before jumping both feet forward.
Falling markets are a risk when it comes to buying off-plan. This is because the price you buy it at and agree to is locked in once the contract is signed. This means if the market crashes or there is any other level of turbulence, you may end up greatly overpaying for the investment.
The image you are building in your head may not be what the outcome of the project will look like. Due to this, your expectations may fall flat, especially if you do not get to view the property and official progress until the project is completed.
Issues With Financing
You have to remember that projects, especially large ones, will take time. You will want to look ahead and see the forecasted window of time the project will take until completion and factor in possible delays. If you do not know your time window, then you run the risk of missing your opportunity to renew your loan pre-approvals.
Builder bust can occur when buying off-plan as the project is at the mercy of the developer. This means that if the project developer goes broke or has some other issue that causes delays or outright project failure, there is not much in place able to be done other than to write off the loss. This means you must plan ahead no matter how rare this instance may be so you can get some of your money back that you have invested in the project.
Benefits of Buying Off-plan
Although we have outlined some quick points to be wary of, buying off-plan does have its benefits as well.
Some off-plan options allow for a certain degree of customization when it comes to what the project will look like at completion. This means that you could be able to choose flooring types and other cosmetic choices that would not be available for a property that is already finished.
Buy Now and Pay Later
Buying off-plan allows for you to pay as you go with the project or finish payment all together at a later time. Many firms will ask for a certain percentage of the total price upfront and then have lower monthly payments or simply ask for the rest to be due at project finish. Due to the nature of many off-plan projects this can be months to years down the line, so you have time to invest elsewhere as long as you have the funds available when they are needed.
Price locks when buying off-plan can be a huge advantage and allow for a possibility of massive savings. Because you are locked into a contract at a set price, if the market ends up growing and the value goes up along with what new investors will pay, you are set in at the initial lower price. This ends up saving you money in comparison to other property investors.
Many development companies will have a larger push to get investors for their off-plan options. This means there is a great potential for discounts to be offered in agreement to lock in a price in order for the company to meet its investment goal and requirements.
How to Buy Off-plan?
Buying off-plan is a fairly simple process as long as you have a great solicitor or company working with you to help you along the way.
Placing Your Reservation
Once you find an off-plan project you want to invest in, you will pay an initial fee that can vary in percentage in value of the total project.
All normal legal processes of buying a property are done through a solicitor and when ready deposits and exchange contracts are taken care of.
Time to Monitor
Through the course of the project, you will be able to monitor progress to be able to ensure mortgages and anything else needed will be ready to match the projected timeline.
The developer will give you an official notice that the project has been completed to give you ample time to be sure the funds are available to finish your payout.
At this point, your project is officially finished and the rest of your payment for the off-plan property is due.