When demand for property in popular locations begins to outstrip supply it is increasingly common for individuals to look for alternative real estate investment opportunities. Off plan property purchases have become increasingly popular in recent years, especially in destinations which have experienced rapid growth.
Historically, buying off plan can come with significant financial rewards, but the method is not without its risks and does not guarantee immediate success.
Pros of Off Plan Property
By buying a property off plan, investors are able to secure a price based around today's real estate values. The aim is to ensure that by the time the build is completed that value will have risen, thus immediately ensuring that you have achieved a return on investment.
Some investors take full advantage of the fact that developers are happy to accept payment for the builds in stages, with many deciding to put the property back on to the market just as it is about to be completed and take out all the profit from the increase in value the property has achieved throughout the period it took to build it.
It is important to note that this is a rather risky approach as the property market does go down as well as up and there might not be an immediate buyer looking to snap up the home straight away.
Cons of Off Plan Property
However, off plan investing comes with a number of risks. The first falls on the side of the developer and their financial securities during the build. If the developer collapses, it is likely that any investment would be lost.
Furthermore, there is no way to guarantee the final build quality of the project that is being bought into. It is recommended that prospective purchasers adopt a sensible approach and discuss and include in the original contract relevant expectations for the completed property.
In addition, visiting past examples of the developer's work can be an effective measure of potential quality.
As with any property buying decision it is important for individuals looking to invest in real estate off plan to consider the location of their purchase. It can have a large impact on the current and future value of the home. As such, those looking to maximise their return on investment should look to take advantage of numerous emerging markets around the world, with economic and currency-based factors all playing a vital role in any final decisions.
- Friday 25 June 2010