Advantages and Disadvantages of Buying Off Plan

Purchasing a property on an off plan development can make you a decent profit, but it can also spell disaster if the rental or selling market changes during the construction period. In other words it’s safe to say there are advantages and disadvantages to any off plan purchase, as there are with all property purchases, and a few of the more important points are outlined below.

 Advantages

  •  You get to buy a property at today’s prices but sell or let at tomorrow’s prices. Hopefully the property market and the rental market will both improve during the property construction period so that your off plan purchase experiences capital appreciation and in the case of it being used as a rental property, an increased achievable rental amount as well.  
  • If the property market does improve between you reserving your off plan unit and the completion date you stand to make between 10% and 20% profit from your initial 10% deposit.
  • There are decent discounts to be had if you reserve your off plan unit on the development launch date or pre-launch if you get an invite to the event. You might also be offered additional discounts for buying more than one unit on the development.
  • Obviously all off plan units are new builds and as such they require very little maintenance when completed. They also often come with guarantees which ensure the work is top quality.

 Disadvantages

  •  The risky thing about the property market is that property prices can go down as well as up, and there is a possibility that on completion your off plan purchase may be worth less than when you bought it. Admittedly this doesn’t often happen but it could, and if it did it would leave you out of pocket.
  • Depending on the length of time needed to complete the development, rates may rise or rental valuations may fall. Either way you could end up having to pay more in mortgages payments each month than you receive in rent – so leaving you with negative cashflow.
  • At the time you reserve your off plan unit the rental market in the area might be very good with a constant flow of suitable tenants waiting for properties like yours. By the time the development is completed though the rental market may have changed drastically and it might prove difficult to let your property.
  • If you choose to buy an off plan unit at the launch then it will be built as part of the first phase. This in many ways in an advantage but it will mean that your tenants will live on or next to a building site while the remaining phases of the development are completed…and this could decrease the amount of rent you can achieve from the property. If you go for a later phase though you might not get the significant discounts offered on the earlier phases.

So as you can see there are good points and bad points to off plan property developments. All you need to do is decide whether the potential advantages outweigh the disadvantages and go from there.