In: Categories » Legal and finance » Real estate » Benefits of Purchasing Property `Off Plan`
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Compared to purchasing a property that is physically built and ready to be occupied, reserving at Off-Plan stage allows investors and homebuyers alike the opportunity to secure their desired plot/s at a very early stage. Typically, purchasers view the proposed floor plans, site plan, specification, etc. and reserve a plot on this basis. Some developers may even allow keen purchasers to reserve before final planning permission is in place (on the basis that if full planning is not granted, all reservation fees, deposits, etc. to date are returned in full!). Some may find that purchasing Off-Plan is not for them, as they are not safe in the knowledge that they are committing themselves to purchase a property that they can not yet physically view. Some may even have concerns that the development may not be finished or that property layouts or finishes may change slightly from the original plans. Buyers usually have greater security reserving an Off-Plan property from a national housebuilder compared to a smaller local developer. However, many thousands of buyers have successfully purchased property Off Plan and has now become their preferred method of property acquisition. So, on to the benefits of purchasing property Off-Plan... By reserving Off-Plan, investors have the opportunity of reserving their preferred plot in a development. The first allocation of properties reserved are normally the ones which have the preferred layouts, views, etc. Basically, either the most desired plots or the best value for money. If there are any properties remaining for sale towards the end of the build period (and I emphasise “if” as many popular Off-Plan developments have sold out in their initial launch), it stands that these plots may be less attractive. For a property investor this could mean that by not reserving Off-Plan, their return on their investment may not be maximised. They may be attempting to let a property which may not be in the preferred location (for example) in the development. This could also have an effect on ease, speed and price of re-sale. For a property investor not reserving Off-Plan, profits could be reduced by not being one of the first to secure the best plot/s. This leads to another point which attracts many investor Off-Plan reservations… Particularly on large developments, developers tend to have planned price increases through the build stage. This tends to directly reflect the increase in buyer confidence through the build process. If you look at a buyer who has reserved towards the end of the build period at a higher price, compared to an astute buyer who has reserved Off Plan at a lower price, I’ll leave it to you to decide which one you would rather be! In a market of increasing property values, purchasing Off Plan is ideal for buyers who wish to have a property on completion which is worth more than they originally reserved at. If you reserve a property at Off-Plan stage, we will assume for indicative purposes that it will be 18 months until that property is physically completed (There are some opportunities to reserve “Off-Plan” 5+ years before anticipated completion!). In a market where property values are increasing by 10% per annum, reserving a property at an agreed price of £200,000 Off-Plan would have a value of £231,000 after 18 months! For investors and homebuyers alike, this increase in value would be very attractive. Particularly when you consider that you will have no mortgage payments on the property until completion. It is likely that investors will have to pay a deposit upon exchange of contracts and in some cases further stage payments until completion (usually dependent on the length of the build period). By committing these funds until completion (where deposits are returned by the Developer, usually to be used as or towards the buyers mortgage deposit) there are substantial gains to be made. From this brief introduction to purchasing property Off-Plan the benefits are plain for all to see. Particularly in a market where buyers are confident that property values will increase, the advantages of buying property Off-Plan can become a very attractive proposal.
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