Off Plan Property Investment

Off plan properties are viable and lucrative investment ventures in Real Estate. It has many advantages as well as disadvantages which can be properly managed to reduce or eliminate risk if diligently approached and executed. Some investors have enjoyed great returns from off plan property investments, whereas others have suffered grave losses.

We’ll discuss a few pros/ cons and how to approach off plan investments.

PROS… Lower purchase price

This is a huge advantage of buying off-plan. Property can be secured below market value, primarily because developers want to sell off as many units before the development is complete. In turn, off takers can leverage on lower pricing to acquire unit(s). Win Win for both parties.

Payment in Stages

Estimated delivery of off plan developments offered is usually between 12 and 24 months. This allows off takers to spread payment over the building stages/phases depending on the agreed terms. More beneficial to subscribers as they are presented with the option to purchase without necessarily paying out a lump sum of money for property yet to be erected, this can be really scary.

Direct Involvement

Off takers have the opportunity to be involved and watch the development rise from foundation to finish while experiencing growth in value. Some developers extend a level of control to off takers over details such as fittings and fixtures, provided it is not in conflict with or override the grand plan.

Profit

It is common knowledge that the value of property increases over time. Property being sold off-plan would increase in value when completed. Off takers have the option of selling off their unit{s} at the new value or retain to tenant for regular income. Those who acquire to live in their properties also enjoy profit from savings on purchase price. Either way, win!!!

CONS… Market Uncertainty

Property prices are influenced by a number of external factors, e.g. location, interest rates, demographics, economic growth, etc. Unfortunately, we can exercise little to no control over some of these factors. This makes uncertainty of the property market a key risk factor.

Delays

The “African time” syndrome, though not only experienced in the African region, is not necessarily a deal breaker but it can be destabilising and disruptive of plans already in motion. This is not uncommon so it might be wise to give some time after the estimated delivery date to accommodate any delays.

Can/will they deliver?

To buy property off plan is to trust the developer fully to deliver and uphold their end of the deal.

Particularly risky in the unfortunate event that they go bust before fulfilling their obligation to deliver your property.

More so where financial commitments have been deposited, there is a chance it will be lost and worse, no property to fall back on to recover funds.

What to do Due diligence

Before you decide to invest, consider the location of the development. It must have potential to boost capital growth. Are there similar developments? Are the sold out, selling out or in high demand?

3D renderings, CAD drawings, 3D demos etc. are very interesting to behold.