The Dos And Don’ts of Buying Property Off Plan

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