Off Plan property
Pre construction property can bought before a brick is laid and sometimes before even planning permission is granted. Off plan property is a great way to make your profit on the purchase. Typically buying property at this early stage almost guarantees you a profit on the selling price. However investors need to study the market, builders may offer the property cheap enough for investors to make a profit but with a downturn in the market this could be short lived. Some builders will guarantee that the price of the finished property will be 'X'. This can be ideal as investors can anticipate profits and even plan what they will do with the instant equity in their property once it has been finished. Many lenders require 15% or morebefore thy will offer financing off plan property can almost have these deposits built in. Investors need to be careful with title and planning permission and should seek legal advice to make sure that these are correct at the time of purchase.
Overseas off plan property can be cheap because the builder needs to raise funds to continue building and without your early investment money the project may not even start. Investors need to seek guarantees regarding projects that don't take off. A safe way is to have your money held in an escrow account.
Here are some considerations:
1.) What guarantees do you have that the developer would not go under or this project would not go under?
2.) Will my deposit be placed in an Escrow Account?
3. )Research the building company, what work have they done in the past
4.) Has the builder secured planning permission and local permissions for the project?
5.) Are there any legal safeguards for foreign investors in the case of non-completion or poor construction work by the developer?
6.) What if you decided to sell before completion of the project, would that be possible and would I be penalized in anyway?
7.) How easy is it to buy and sell property in this country?
8.) What if I decide to sell my (residence/hotel suite)?
9.) Are there any other fees while the project is being built and what about after completion?
10.) What do you anticipate the rental income to be once the facility opens based on current rates at similar properties?
11.) What is the payment schedule?
12.) What happens if the building is delayed?
13.) What is the rental yield I can expect?
14.) What are the tax and inheritance implications?
15.) What is the buying process in this country?
Off Plan property why is it so cheap?
Many overseas markets have not been subject to the over inflated prices that many European and US cities have undergone. These prices have been driven by demand over supply. It is clear that many countries such as Romania , Bulgaria and Czech Republic are new to the overseas property markets. Former eastern block countries are a good example of this. Regions that do not have very good access and low cost of living will also offer cheap off plan property . However it could be that there is so much land available i.e. supply is plenty that property prices are not being pushed up. Emerging markets where investors have not had a chance to buy property could be ripe. Consider the buying and legal process some governments make foreign buyers jump through so many hoops that it puts investors off. Healthcare, government stability , lack of infrastructure all reasons why property is still cheap.
Buyer Beware
Investors who find cheap property abroad should know the reason why it is priced so low and identify the reasons that will remedy these factors. A good example is a region with a lack of infrastructure but there are plans in place to improve upon these or a place with poor communications and there is going to be a new airport etc. This sort of foresight can save money on purchase and make money on sale.
Article by Nicholas Marr a lifetime property investor and CEO of Marr International the company behind leading overseas property portal www.homesgofast.com
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