Off Plan Property Investment

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Anita Mba

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. They are especially important as they are the visual interpretations of the proposed development. What’s even more critical and relevant is knowing that your developer has the capacity to deliver a LIVE and realistic representation of these beautifully designed pictures and demos.

You must conduct sufficient research, there is no side stepping this. Hire a lawyer, surveyor or whoever you deem necessary to get your facts and figures right. You’re parting with millions of naira, thousands of pounds or dollars etc. It goes without saying that this should be at the top your to do list when purchasing property off plan.

The integrity of your developer(s) matters, know them one on one, go through their track record, have they delivered in the past? What reputation do they have? If they’re new to the scene, ask questions. Conduct your own search on the documentation of the land and be absolutely certain that your developer has been granted the necessary approvals by the state and other relevant bodies.

Be cautious of any ambiguity or loosely addressed issues in the contract, ensure that you the buyer are protected because be rest assured the developer will be covered. It must clearly state the implications and consequences of delays, finishing, overall quality of the development etc.

Lastly, enjoy the process and watch your investment breathe. Use the time to plan and decide what you intend to do with your property, see. Plan fittings and fixtures etc.