Buying off the plan implies that you enter into a contract to buy a property at the initial development stage or before construction begins. Therefore, you can view the building plans and design in the absence of a physical property.
For prospective investors and homeowners, this plan can be more flexible and affordable than purchasing an existing property though you must beware of other considerations. If you’re thinking of taking this route, here’s what you should know.
Factors to Investigate before Purchasing off the Plan
Safety and Security
Ensure you inquire about safety and security features, for instance fire sprinklers and extinguishers. This way, you’ll know whether the developer is cutting corners.
Verify your Contract
It’s imperative you obtain independent legal counsel and ensure the contract includes a solicitor’s approval clause. In the event that it’s absent, ask for its insertion. You should also inquire about the accrued interest and the duration of the conditional period.
Property Market
Whether you’re an investor or owner, you must understand the market and this involves thorough research. You should examine rental yields, existing vacancy rates, and demographics together with comparable sales.
You should also identify any proposed developments in the future that could affect your property purchase.
The Developer
It’s important you investigate the developer to ensure they’re trustworthy and reputable. You should obtain information concerning their experience, previous projects, and establish whether completion occurred in a timely manner.
Benefits of Buying off the Plan
Time to Save and Plan
Since you’ll be committing to a property whose completion may take 12-18 months, you’ll have sufficient time to plan. This is important if you intend to occupy the home in future, leaving you ample time to organize the sale of your current property or end of lease.
Furthermore, it enables you to continue building your cash funds. This gives investors and homebuyers the liberty to keep their finances working in different areas, while knowing they have locked in their buying price safely.
Peace of Mind
New properties typically have a structural warranty, giving buyers confidence over the maintenance expenses they’re likely to incur.
Investors have legal protection on the building performance of their investment and won’t need to constantly spend money on repairs. You’ll find this is beneficial for ongoing cash flow especially in the initial years.
Risks of Buying off the Plan
Fluctuating Market
Real estate markets tend to fluctuate, so the resale cost can be much less than what you anticipated though you may have scored a good deal. Therefore, your property’s resale value may not be similar to your previous estimation depending on factors such as market cost fluctuations.
Delay in Completion
A delay in completion isn’t a rare incident since developers rely financially on prospective buyers, the bank, and investors. However, delays leave you in a complex situation because you can’t move in on the planned date.
Consequently, you might have to seek a temporary accommodation. In the case of an investor, this means missing rental income.
Wrong Type of Property
A common risk associated with this plan is the property kind and its suitability for an area. Bear in mind that purchasing the wrong kind of property off the plan could lead to poor re-sell values or difficulty finding tenants. Nevertheless, you can avoid this by studying your preferred area before shortlisting developments.
Final Thoughts
While buying off the plan can be a thrilling and advantageous venture, make sure you conduct research and seek professional advice to avoid any pitfalls.
For more information on buying off the plan, contact us at Apartment Agents or leave a comment.