Buying properties off-plan offers a range of advantages and has delivered excellent results for some investors. But at the same time, buying off-plan carries a number of disadvantages and risks. These must be weighed carefully against the advantages in order to decide whether an off-plan property investment represents a good opportunity.
Advantages of Off-Plan Property Investment
One of the biggest advantages of buying a property off-plan is that it gives you more control over fittings and décor. This allows you to ensure that all of this is completed to the exact standard you desire, as well as to boost the property’s value and appeal with any particular added fittings you have in mind.
It can also be useful if prices are predicted to rise significantly by the completion date. It can allow you to get in early at a lower price, secure the property with a deposit of around 10%, and later benefit from a brand new build which has already worth more than you are paying for it.
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Having your property secured before completion also gives you more time to form plans on how to use your investment. By the time it is completed, you should have had time to form a pretty good idea of how you will secure the very best returns and be ready to put your plan into action more or less immediately.
Disadvantages of Off-Plan Property Investment
Most of the disadvantages of investing in property off-plan come from risks that do not occur when purchasing completed properties. For example, the uncertainty of the property market itself is a key risk factor. If property prices fall between the date you agree the price and the completion of the property, you will have already lost money on the date of purchase.
The risk of delays will also be greater than when purchasing a completed property. These will generally be an inconvenience rather than a deal-breaker, but nonetheless delays can be far more significant. It is possible for the building process to be delayed far longer than the purchase process of a completed development could ever be.
Another risk factor is that you will lose out if the developer goes bust before the build is completed. If you have already paid your deposit, you are likely to lose it and have no property in return.
Purchasing off-plan properties with a mortgage also carries some risk factors that need to be considered. While many banks are happy to lend for off-plan purchases, the agreement will often only stand for six months. If the build will take longer than this or gets delayed, you may find yourself rushing to agree a new mortgage. If circumstances change, particularly if property prices fall significantly, this may also lead a bank to withdraw its offer.