Purchasing 'off plan' simply means making the decision to buy a property before the building is completed. People will often do this when buying a residential property to have an input on the final finish of the property. But, for an investor in property, the option of an 'off plan' investment can be of huge importance.
Builders of properties quickly need to recoup their finances, thus an immediate start to the marketing of a development is essential. In all forms of sales, discounts and reductions have always been an effective means of moving product quickly, properties are no just the same. A seasoned investor will recognise the opportunity to make a significant saving and purchase their investment property before it is built.
For securing any Off Plan property, a deposit is always needed. This means that the Investor can reap the reward of the monetary increase during construction (often around 4-18mths in the United Kingdom), usually only having paid out the deposit as opposed to the full cost price of the property.
As an investor you need to remember property investing is a business, and therefore decisions should be with the head and most definitely not with the heart. Its obvious that the information to make investment decisions are essentially very different to those needed to buy your own residential property. The status, financial security and history of a developer is also very important, as to are floorplans, site layouts and the actual specifications of a building . This will rarely include the usual marketing brochures, but overall this is a very small price for the potential savings that could be achieved by purchasing at this early stage.
The obvious benefit is that for the investor is that the price typically increase as the progress of construction continues on the development. On large sites, there's often very significant increase for each of phase of a development.
When the property is eventually built, the investor still retains the right to complete the property purchase, and benefit from the income from rental or to sell and benefit from the capital growth achieved during the construction. To sell before the actual completion of a property is commonly known as ‘Flipping’.
Flipping has proved to be advantageous as Investors don't have the concerns about furnishing, tenanting, rent collection, insurances or monthly mortgage payments. Which ever choice you make, investing in off-plan can often provide a great way for new investors to begin their portfolio of property investments.