Off plan buying is a great way to secure real estate at a very low cost in comparison to buying property that has already been built. There are many risks associated with off plan property buying, but if you are successful with the purchase, then you will have a great property at a cheap price, whether the property is an investment property or a home to live in. Buying off plan could be the only way that you can get the property you want in a specific location or with features that you might not be able to get once construction has begun.
Secure a Loan from a Bank
The first step to getting off plan property is to get a loan from a bank. Many banks will gladly loan you the money as a tool for investment, or as a way to get the house that you want to live in. In many countries, the bank could even have ways to protect you in the event that the construction does not go to plan. There are many things that can go wrong here and using cash as an investment can be relatively risky and extraordinarily expensive. Going through a bank for buying off-plan is the best way to make sure that the construction goes to plan.
Risks of Buying Off Plan Property
There are many risks associated with off plan property buying. The construction company can fold before the construction is completed, the value of the property could go down significantly, and there have been loopholes in the past that have taken advantage of the investors that choose to buy off-plan. Analysing the market and determining whether or not you will be able to successfully go through with off-plan buying is critical if you want to turn a profit or get the property for a lot cheaper than you would if you waited for the property.
How to Minimize Risk
There are a couple of ways that you can minimize the risk of off plan property buying that aren’t too expensive and can save you loads of cash in the long run. The first way to minimize risk is by assessing the market and knowing whether or not it will be valuable by the time that construction has finished. Off plan property buying is a long-term investment, and you won’t be seeing any returns for the next couple of years, so knowing where city expansion is going and where the hotspots for the property are headed is one way that you can analyse the risk in buying property off-plan.
The next way that you can minimize risk is by doing research on the construction company that will be building the establishment. Companies that have been around for a long time will be more likely to stay alive than companies that are just starting up. Look at the company’s history and see where they are at in terms of how they are doing economically and determine whether or not they are safe to go with as a construction company.
Finally, check with the banks and local laws on what protections you have as an investor. In the past, specifically in NSW, developers were able to back out at the last minute and sell the property for a larger value than the initial deposit for the off plan property buying, thus losing the investor a lot of time and money in the process.
There are many risks that are associated with off plan property buying, but if you play your cards right, and do good risk analysis, you can come out with a property worth a lot more than what you put into it.