Of late, looking at the uncertainties of the stock market, people all over have been investing in real estate in large numbers. One of the avenues they are exploring is investing in off plan properties. Off plan property investment involves buying the property from developers, as it is being developed, and sometimes even before the foundation of the building has been laid. A large number of serious property investors have been going the route of off plan property investment, in the last few years, to improve their wealth, their net worth.

When you are making an off plan property investment, you are in fact investing in what is on the architect’s drawing board. Planning permissions would have been granted and the building work started, with the completion still 18 months to 2 years down the line. All you need to do is to put up an initial deposit, which could be any thing from 10% to 30% of the total value. You need not pay any thing else until the building is complete.

Benefits of Off Plan Property Investment
Like all real estate investments, off plan property investment too has its down side, but its benefits far outweigh its risks. You need to look at certain factors to succeed in an off plan property investment, such as:

• Buying in ideal locations
• Negotiating for genuine discounts
• Buying in a rising market, which will enable you to extend your equity and, therefore, your safety margin. 
• Ensuring your mortgages are covered to at least 130% by buying in good rental locations. This will enable you to re-mortgage your property.

Let us look at some of the benefits of off plan property investment:

• You can negotiate better discounts with the developers for bulk purchases, and if you buy early enough. Developers benefit too by, partially or completely, pre-selling the properties, as this enables them to obtain development finance easier and cheaper.
• The discount provides you a buffer of a profit in case of problems. With an initial deposit of 10% and a 15% discount immediately shows you a paper profit of 1176% on your deposit. 
• While the building is progressing, you do not pay any interest, but receive capital gain if the prices rise.
• Investing in an off plan property investment deal, you have very little cash tied up – up to the amount you have paid as initial deposit, which under normal circumstances is below 15%.
• The discount you have negotiated is an automatic cushion if the property prices fall. 
•  Making an off plan property investment gives you the opportunity, especially if you have entered the deal in the drawing board stage, to change the internal layout and the finish of the completed property as per your wishes.
• You get an excellent opportunity to custom design your kitchen, bathrooms, arrange tiles of your choice, and even change the internal walls around!
• By opting for off plan property investment you are securing today’s property prices. With the rise in property prices two years down the line, you are looking at considerable return on investment (ROI).

The Down Side of Off Plan Property Investment
Risks are part and parcel of any deal, be it real estate or otherwise. However, generally in cases of properties, there are always long term gains involved. Let us look at what type of risks are involved in off plan property investment:

• At times, buying directly from the developer may not get you any discount. Paying the full amount may expose you to uncertainties of price reductions. Try to avoid this and go through a real estate professional, who may be able to negotiate a discount.
• There is every chance that despite the discount you have negotiated, the prices will fall. To protect yourself from this, ensure you buy in an area considered to be a ‘hot spot’.
• Buying incomplete property from a developer exposes you to the risk of substandard property, or the property not being completed due to the developer’s financial difficulties. Ask to see the properties previously completed by the developer, and talk to those customers who have dealt with him. 
• Have a contract drawn up with written guarantees of the developer’s financial status. Have an attorney check out what your rights are throughout the process of building.
• Off plan property investment does not allow you to move into your dream home immediately. You have to wait for it to be completed.

If you are careful, you can enjoy the benefits of off plan property investment, as they far outweigh its risks.

 

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