Investment, as you already know, can be thrilling and yet risky. As for off-plan property investment, in all its thrills, it is yet a complex venture to invest in. It gives off an appeal, especially when you have to purchase a property below market value with hopes of it appreciating in the future, and draws in more investors.
To know more about off-plan property investment, the benefits, how it works, and its risks and challenges, then you would need to read this article.
What is Off-Plan Property Investment?
Off-plan property Investment is a type of real estate investment that involves purchasing a property before completion. In some cases, these properties are bought even before construction starts. With off-plan property investment, as an investor, you invest based on the blueprints, architectural designs, and 3D tours of the property.
This investment seems to be gaining popularity among investors because, with a low purchasing price and flexible payment options, it offers you a potential appreciation of your capital, making it a decent investment for investors who capitalise more on growth in the value of their property.
Despite all the benefits and promises of capital appreciation, this investment plan also comes with risks: market fluctuations, changes in the layout of the property, bankruptcy, and others.
In this article, we will be looking more into everything you need to know about off-plan property investments.
How Off-Plan Property Investment Works
Off-plan property investment, from the definition, looks quite simple but can be a bit complex if you don’t understand how it works. Understanding the basics of off-plan property investment gets you ready to invest and make your plan.
The first thing you need to do is research and select the property you want to invest in. The developers at this point would put the property out for sale. Your job is to know which location, the reputation of the developer, the appreciation potential, and demand. You need to know the available payment options and choose the best for you (installments, mortgage options, lump sum payments). You also need the key stakeholders before making any plans: the developers, real estate agents, and legal advisors.
Benefits of Investing in Off-Plan Properties
1. Lower Purchase Prices and Discounts
With off-plan property investment, property builders often offer properties to the market at a discounted price to attract potential buyers. This is done at the start of the property development. The builders are always willing to negotiate prices, allowing you to save more while getting large discounts if you can pay upfront in cash. In cases where you can’t pay upfront, the developers will give incentives that give more room for investment. You are allowed to stretch payments, which gives you enough time to save.
- Higher Capital Appreciation Potential
One of the biggest advantages of off-plan property investment is the potential for higher capital appreciation. In cities where real estate is a huge investment, off-plan properties are prone to see a significant increase in value when completed. The price appreciation from pre-construction to completion will give you instant equity. This makes investing in high-growth areas for better returns. Major cities like Lagos and Abuja are where to look for off-plant investment.
3. Customization and Modern Designs
Compared to buying an existing property, investing in an off-plan property allows you to choose layouts, finishes, and upgrades that suit your tastes or tenants’ expectations, customising the design. This goes from choosing the fittings to the fixtures, which can help increase the appeal of your property when it comes to selling or renting it out. This gives the property a personal touch and a newly built, energy-efficient home.
4. Favorable Payment Plans
The fact that investing in off-plan properties allows you to make commitments at a pace that suits you is one of the major benefits. You get the opportunity to make a small upfront payment to own the property with the promise of paying later. This gives you enough time to save, make payments, and even make plans for your investments. It changes the market, making real estate investment more accessible.
- High Rental Demand and Yield
One notable difference between a preexisting property and a newly built one is how they have more demand. They tend to attract more people willing to pay higher rent compared to older buildings. They usually require less maintenance, making them suitable for people looking to rent a ready-made apartment and they are usually located in areas of high demand.
Risks and Challenges of Off-Plan Property Investment
With real estate investment comes risks and challenges. You cannot expect everything to be all about profit without expecting a loss or challenges along the way. Some of the major risks and challenges of investing in off-plan investment are:
- Delay in construction or cancellation of ongoing projects
- Bankruptcy on the part of the developer and fraudulency
- Fluctuations in the market leading to changes in the values of the property
- Having limited control over construction and quality
Key Factors to Consider Before Investing in Off-Plan Properties
1. Reputation and Track Record of the Developer
This is the first factor to consider when investing in off-plan property. The developer’s reputation in the market must be well-considered and researched. You need to also look into customer reviews and check the required licenses and regulatory approvals.
2. Location and Future Development Plans
Location is one of the most important factors you need to consider when investing in real estate. With off-plan property investment, you need to be able to choose areas with high rental demands or developing areas. Be on the lookout for locations with government infrastructure projects and economic growth potential.
3. Payment Terms and Contract Details
This is key in off-plan investment. You need to understand the details of your contract and policies regarding the refund policies. Seek legal assistance for contact review, know what you are investing in before you do.
4. Exit Strategy and Potential Resale Value
Evaluate long-term market trends and design your exit strategy. Know when to sell, buy, and rent out to amass a maximum ROI on your property.
Steps to Successfully Invest in Off-Plan Properties
- Investigate the developer and the project’s location.
- Comprehend the financial obligations and payment arrangements.
- Confirm the necessary legal and regulatory approvals.
- Examine the contract details thoroughly before signing.
- Track the construction progress and keep in touch with the developer.
- Prepare for possible delays and have backup plans in place.
Conclusion
Off-plan property investment like evry other real estate investment is very lucrative and advantageous if you are planning on building a steady wealth and income. However, if you do not understand the risk that come with investing, you may lose more than you bargained for.
It is said that “nobody is an island of knowledge” This also means that you need to seek advice from people who know more about this form of investing before you venture into it, conduct your due diligence, and make your plans accordingly.
To have a profitable investment in off-plan investment, know the right location to choose, and make sure you have enough funds at hand to make payment. This gives you an edge when investing.