Prime
What to consider before buying off-plan property
Brian Arineitwe
What you need to know:
- Related complications. It is important that you do your research and understand why you want to invest, how much you want to invest, how you intend to manage the property when it is completed, your potential tenants if it is a rental or buyers if you need to sell since doing this will greatly improve your chances of finding the right deals on the market.
Off-plan property is simply the selling or buying of a property before it is built with only plans available to inspect. In a rapidly growing real estate market, buying off-plan offers investors and home buyers a lower price since most times, off-plan property tends to be approximately 20 per cent to 35 per cent cheaper than the finished property, which allows buyers to get their chosen property at a low price than if they were to wait for construction to commence.
In addition, smaller deposits and staged payments associated with off-plan buys make financial sense since you only need a low deposit with the remaining cost payable in installments and majority on completion. Ideally, you could also flip your property at a profit even before completion since it is more than likely that your property value will go up in value before completion.
Off-plan buys offer high capital appreciation due to property price growth and low initial capital outlay given that in most cases, the developer only requires you to make a 10 per cent deposit to secure the property with full payment made when the property is built. This enables you to secure a high value asset for a low initial capital outlay.
Home buyers and investors in off-plan projects are likely to access huge discounts and more flexible payment plans, especially at the launch of the new project since developers tend to increase prices for the remaining inventory after the launch.
Despite the many benefits of investing in off-plan properties, it is highly recommended to have a checklist to consider as you invest in off-plan projects to mitigate the risks involved.
It is important that you do your research and understand why you want to invest, how much you want to invest, how you intend to manage the property when it is completed, your potential tenants if it is a rental or buyers if you need to sell since doing this will greatly improve your chances of finding the right deals on the market.
Location, location and location. When buying any property for investment whether off-plan or an existing one, it requires you to be right about the location. If you do not buy property in the right location, you won’t maximise profits. Infrastructure development such as access to basic amenities like schools, hospitals, supermarkets, good roads, security and other things that simplify your day-to-day living are very critical.
The track record/credibility of the company or developer is paramount. Work with a registered, good reputable and trustworthy property company with a long successful track record of helping investors such as yourself make fruitful off-plan purchases and not simply sales agents. Knowing the developer and having confidence in the project is key since buying off is not a natural process and won’t feel comfortable, so any reputable developer should be able to make you feel comfortable from the start answering any questions that you may have about the process and the entire development. Arranging a site visit is highly recommended. Once that is done, you can go to the next step.
Strictly buy from a developer that protects your money. Most property transactions involve a lot of money. To some people, it is their life savings for their dream home. So, it is paramount to invest with a company that has some client money protection scheme in place to protect your deposits until the property is delivered and has a special purpose vehicle behind the development.
Get clarity on hand over and completion dates since the most common issue when buying off-plan property is the risk of delay in handover. Make sure signed documents have specific mention of the expected completion date of the project along with a solution on how the developer will address potential issues of not meeting the handover deadline.
Finally, check and regularly monitor the developer and site during the construction since you have entrusted a lot of money with the them.
Mr Arineitwe is the sales and marketing manager of Pearl Marina Estates Ltd/
Centum Real Estate.
