Buying a property off plan has become extremely popular over the last five years or so, with more and more investors opting to go this route and enjoy the many benefits it offers. The funny thing is that very few people who were outside of the property investment loop had actually heard of off-plan property purchases before then.

Buying an off-plan property is effectively buying a home on a new development area before it has actually been built. Developers choose this option so they can sell some units beforehand to help finance the project and minimise risk. When buying off-plan, investors will be able to view the plans, ask questions, speak with the relevant people and so on but they will not be able to view the actual property until after they have put pen to paper. Having said that, developers will often have a pilot unit built beforehand to show buyers the quality and finish of the development.

There are many reasons for the increase in off-plan purchases, including the fact that more and more people are beginning to realise the distinct benefits of doing so. The most important benefit is that it an off-plan property can cost you a fraction of the price of buying into a finished development. The idea of saving money on property can be extremely appealing, especially for those individuals who are looking to invest for the future.

However, not all off-plan property developments automatically make good investments. As with any real estate sector, there have been scams in recent years with terrible consequences for some buyers who undoubtedly made the wrong decision.

Still, buying property off-plan need not be risky at all if you do your homework properly. If you take the right steps and precautions when investing in off-plan developments then you can make a sound investment and keep your peace of mind! The following list of dos and don’ts will help you to protect yourself and snap up a bargain all at the same time.

Dos

• Get your own lawyer. It is better to have an independent lawyer on your side when you are making the purchase rather than someone the developer recommends because the likelihood is that they are biased and will serve the developer better than you.
• Investigate the developer that you are considering buying from and look at previous properties and at any pilot units of the development you are interested in. You will obviously not be able to see the one you are purchasing off-plan, but you can get a good idea of what you are buying based on the developer’s past work.
• Make sure that the developer has an insurance policy that covers refunding you your money in the case that the company should go bankrupt before completing the project. If not, find another developer.
• Check out the area and make sure that the investment and profit potential is still there. If an area is over-developed already and/or there are a high number of investors already in the area then you will find that your profit margin will be seriously diminished.
• Double check your contract and make sure that it is legally watertight. The contract should set out everything involved in the purchase, but it has been known that developers have found loopholes and delivered sub-standard properties as a result. Make sure that your lawyer looks through the contract and it serves your wants and needs.
• If possible speak to people who have bought properties from the same developer in the past to find out their experiences. You can either do this on site, or else try and make contact with past buyers through websites and Internet forums.
• Always stay in close contact with your developer throughout the build process so you are always informed and know exactly what is going on throughout.

DON’Ts

• Never buy a property without visiting the area in question and obtaining documents stipulating exactly where your property will be. There have been stories about investors thinking that they are buying one plot of land but are given another when the properties are finished. Protect yourself against such possibilities.
• Do not sign on the dotted line until you are thoroughly happy with your decision and have peace of mind. If there is one single doubt in your head about buying from a specific off plan developer or on a specific development then don’t sign anything until you’re completely happy.
• Never make an investment that you cannot afford. This is perhaps the most important point considering the worldwide credit crunch that is happening at the moment. Make sure any property investment you make is within your reach and that you will be able to pay any mortgages you take out. Fail to do so and you could have more to lose than you may think.
• Make sure you inspect your property well upon completion. There is usually a time period to do so, during which you can register any complaints for the developer to rectify.
• Avoid completing payment for your property until it has been built to your satisfaction. If you have any niggles or alteration requests then chances are the developer will not make those changes for you. If you hold the payment than they most probably will!

Further reading:

The 4 Essential Questions that Property Investors Should Ask… But Don’t

The recent shift in Canada’s real estate climate has perhaps been most potent in the young adults market. Now, more than ever, 25- to 39-year old Canadians are homeowners, not just renters. What’s behind this trend? Yes, wages are higher, but so is the cost of living. For the answer, we need to go right to the source: mom and dad.

Parents are helping their children buy property

Rising property values have made it harder for this generation’s young adults to get into the housing market than it was for the baby boomers. With this in mind, it looks like parents are opting to give their kids a leg up, rather than splurging on a tropical vacation or a new R.V. A poll done by the Royal Bank of Canada suggests that parents are now socking away less for their retirement in favor of investing in their adult children. For many baby boomers, real estate has become the preferred gift to give.

It may seem like an overly generous gesture. However, the reality of today’s market is that most young adults simply cannot afford to buy their first home without financial assistance. Parents are getting involved because they know that without their help, their children could be well into their forties or later before they could get enough together for a down payment. When money’s tight, many parents also don’t bat a lash at making full or partial mortgage payments on behalf of their children.

Young adults choose a different kind of property

This is great news for many property developers because they have a whole new market to tap, not to mention the comfort of knowing that their buyers have the financial backing necessary to seal the deal. To attract these young buyers, developers are competing to create the marketing strategy most attractive to this generation. They know that young Canadians (and their parents) are shying away from pricey resale single-family properties. Advertising campaigns emphasize low prices in exchange for hip, trendy new pads with enough amenities to please both parents and children.

Property developers have significant opportunity in Canada because off-plan properties and multi-family developments are frequently more financially accessible to first-time buyers than other types of housing. Yes, parents are weighing in on the issue, but they’re looking for modest, ‘first-timer’ houses, not lavish places that cost as much as their own homes. For the sake of affordability, it’s condominium developments and new houses in the suburbs that are getting all the attention.

In the interest of being economical, young adults - with the help of mom and dad, of course - are progressively becoming some developers’ biggest customers.

Industry experts are expressing some optimism about the real estate market in the United States. Lawrence Yun, chief economist for the National Association of Realtors, says he expects the soft real estate market to begin a comeback by year’s end.

Nearly half the metropolitan areas in the country are seeing some increase in the price of homes. It appears that the fallout from the worst of the mortgage crisis may be slowing. Nonetheless, tighter standards for credit may keep many people out of the housing market in the near future. Experts suggest that expensive properties represent a high proportion of homes for sale these days. Mr. Yun believes that buyers who want to purchase a high-end home may be waiting for the introduction of higher loan limits.

According to a survey completed by the US Office of Federal Housing Enterprise Oversight, local housing markets throughout the country remain surprisingly resilient in spite of news reports. The health of the real estate industry in the nation’s mid-section remains relatively stable, in part because that area did not see the boom in housing that characterized other regions recently. Home sales in the Midwest rose by more than 3%, in spite of challenges in the mortgage industry. Difficult job markets in Ohio and Michigan are putting some downward pressures on the real estate market in those two states.

Buyers are benefiting from the large inventory of homes on the market today, over 10 months’ worth. Real estate in California and Florida has been hit hardest by the current slump; the figures for those areas add heavily to the negative trend in national data. Although the price of homes is dropping in some markets on the coasts, property prices in California in particular continue to be well above what many people identify as affordable.

There is good news for folks who can’t afford to buy in California. Forbes.com recently identified several cities throughout the US that continue to be good bets for home buyers under current conditions. The list includes Houston, TX; Las Vegas, NV; Phoenix, AZ; and Salt Lake City, UT. At present, these markets are characterized by two very positive features: reduced prices for homes and a solid jobs market.

According to a report in MSN Money, three of the ten strongest real estate markets today are located in Utah: Ogden, Provo and Salt Lake City. Utah’s capital city is partnering with local business to create the City Creek Center project in downtown Salt Lake City. During the next several years, the city will invest nearly $1.5 billion to develop the downtown area. Described as a “new vision” for the city, the plan includes green space, facilities for educational endeavors, a performing arts center, and facilities for sports and recreation.

Included in the earliest phase of the project is Marmalade, a mixed residential and commercial community. The project, touted as Utah’s outstanding example of “green” development, includes nearly 100 condominiums, townhouses and penthouses near downtown Salt Lake City. The new homes will feature natural stone countertops, hardwood floors, huge windows and spacious balconies overlooking the city. Developers are taking reservations now and working with WellsFargo to provide financing.