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Loading ...Why Buy Property Off-Plan?
Posted:Abigail Andrews – Thursday, April 26th, 2007
Buying before even a single brick has been laid may sound like a big risk, but in recent years it has become increasingly popular with investors. The questions you may ask are:
- How does off-plan property investment work?
- What are the benefits and risks?
- What issues should you consider before you commit to an off-plan property with a completion date that could be two years down the line?
What follows is a brief guide.
Advantages of Off-Plan Property
- You buy at current prices, or more likely at a discount. When the building is completed in a year or two hopefully capital appreciation has made it worth much more. In a strong market you can make a 10-20% profit from an initial 10% deposit, by selling as soon as the build is completed. In strong markets 'flipping' is a simple and effective way to realise profit.
- You buy new-build so no maintenance. New-build property also comes with warranties.
Dis-advantages of Off-Plan Property
- Prices fall and stay static, as well as rise.
- Interest rates rise and/or rents can fall during the build.
- Even if prices do rise over the build period, there's no guarantee that it will be easy to sell on at completion otherwise known as 'flipping'. If there are lots of investors in the same development it can be difficult.
- The market can change and it prove more difficult to let out than you imagined.
- It is becoming extremely popular among property investors, the market could becoming saturated with investors trying to sell on immediately, therefore competing against each other for sales.
Whatever your objectives, it is a gamble. Careful research is essential to help minimise the risks - and maximise the gains. But if you research properly it's often a gamble worth taking as many investors are finding out. On many developments today well over 60% of the properties are sold to investors off-plan and the remaining are owner occupiers.
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