Off-plan buying basically refers to buying into a property before its completion. You put down a deposit and pay off the rest in installments as construction continues. At the end of it, you get the keys to your new property. If you do it the right way, buying off plan can be very rewarding, earning you massive returns. Buying off-plan is a great way to purchase a property below its actual market value, which makes it a great investment opportunity. For investors, most are attracted to off-plan due to the promise of property appreciation.
On the other hand, developers offer low prices at the beginning of a project to make sure they secure buyers and investors as soon as possible. However, there have been cases where the promise is not delivered by the developer either owing to financial constraints or simply because they are unscrupulous. As a result, many people have lost their money or ended up with poor quality products. In off-plan buying, the decision is based on a developer’s blueprints and artistic impressions.
To avoid being duped as an investor or homebuyer, here are the factors to consider when buying off-plan property.
1. Developer’s trustworthness and professionalism
Off-plan investments usually require you to make protracted payments throughout the development process and the balance upon completion of the project. As such, the developer should have a trustworthy team that will ensure that your money is secure throughout the period of construction and also be capable of seeing the project through its initiation to completion, successfully,
2. Transparency and accountability
The developer should be willing to divulge all crucial information that might help the client understand them better. This includes information pertaining to their projects. A credible developer will also be transparent with information on how your money is managed throughout the construction stages. You should receive regular updates either monthly or quarterly so you can see where every coin is going, and the quality of the work.
3. Track record
This is important when purchasing an off-plan property. There have been multiple incidences of property scams with people losing money to developments that never kick off. Make sure that the firm you are looking to invest with has a proven track record and experience in real estate development. Find out how long the company has been in business and how many completed developments it has under its belt. In the age of the internet, it is easier to find information on developers through their websites and social media reviews left by both current and previous investors.
It is also important to look at previously completed developments and check the ability to deliver within the agreed period. Talk to owners and find out if they were completely happy with the home they received; whether the developer was responsive when they raised issues during and after construction; and whether they now feel they got value for money. Trustworthy developers remain responsive after the handover of the property because most new homes need some kind of post-delivery attention.
4. Building licenses and approvals
Developers require different licenses and approvals before groundbreaking and eventually starting off the construction of a development. One should inquire about the existence of all the relevant licenses and ensure that the development meets the set standards and requirements before investing in it.
5. Project viability
Before investing in a property, one should visit the site and know the exact location of the property. Investigate the location of the project and the surrounding properties as well. As an investor, you want to make sure that the location is prime and attractive to occupants, especially as a buy-to-let investor. While most off-plan developments will specify where the development will be, the investor should get the exact details and ensure they are comfortable with the location before paying for it.
This is especially important when investing in a property whose location will affect your commute or if you may need to relocate for work or your children’s school. It will also ensure that there is a high probability that your investment will appreciate in value. To this end, expert developers should have their market feasibility studies which should be easily availed to you as a client.
6. Sales agreement terms
It is important to ensure you fully understand the investment you will make in an off-plan property. Most people fail to read the agreements laid out by the developer. One should seek the help of a lawyer to ensure the agreement is acceptable legally and does not have any loopholes or questionable statements. It is also important that before signing the agreement both parties ask all the questions regarding the engagement and agree on the terms laid out. This will help in avoiding any losses incurred or scams since all the scenarios will be outlined in the agreement including measures in case of losses or accidents.
7. Payment options
Different developers offer different payment options for their developments. As an investor, you should inquire about the payment arrangement in place before investing in an off-plan development property. Payment options offered may include payment in instalments, through mortgages, or cash. These details should be laid out in the sales agreement as they will guide you when planning for your finances and picking one that suits you.
An ideal payment plan should last up to the end within the completion dates of the project. The contract should clearly state the amount of initial deposit agreed upon and then detail the specific dates when other payments are expected to come through until completion of the project. Be sure to seek legal advice for interpretation of the contract that you are provided with before appending a signature.
Conclusion
When going for an off-plan property, the experience, and expertise of a developer are paramount. Most importantly, before signing for the deal, it is important to conduct your own property due diligence. Inspect the project, the land title deed as well as the project plan approvals. Review the project design and management team, and their capabilities. All investments incur risks that can be mitigated or avoided if prepared for and by understanding the full scope of the agreement.
