The concept is to buy a property off-plan at current prices and when the development is completed a year or so later, the capital appreciation will have made it worth much more. In a strong market, as we’ve seen recently in Kenya, profits of between 10 percent and 20 percent can be made from an initial 10 percent deposit. As a result, demand for off-plan property remains strong.
Steps to buying off-plan
The following points illustrate the steps you are likely to need to follow when buying a property off-plan:
- Find the right development in the right location.
- Arrange the appropriate finance for the purchase well in advance.
- Reserve your chosen property and pay the reservation fees
- Arrange a surveyor’s valuation of the property, which your mortgage lender will require after an offer has been made.
- Make sure all the mortgage paperwork is complete and ready to go.
- Exchange legal contracts and pay the deposit (usually between 10 percent and 20 percent).
- Conduct a snagging survey about two weeks before final completion and check the property for any defects.
- Be ready for completion (there are usually two dates, a ‘short stop’ and a ‘long stop’) the former is the date by which the developers expect to have finished the building works, and the latter is the date by which they must have done so).
Assess the property market
Research local property prices to find out how the market has performed over the last few months and try to gauge the direction of prices. Buying off-plan in a market where prices are depreciating can put your investment at a greater risk. However, getting it right and buying a property off-plan can be extremely rewarding.
How to Buy a Property Off-Plan: A Comprehensive Guide
Buying a property off-plan can be an exciting opportunity for investors and homebuyers alike. It allows you to purchase a property before it’s fully constructed, often at a lower price than a completed home. However, buying off-plan comes with its own set of considerations and risks. This guide will walk you through the steps and essential tips to help you make an informed decision when buying off-plan.
1. Understand What Buying Off-Plan Means
When you buy a property off-plan, you’re essentially purchasing it before or during the construction phase. This means that you base your decision on architectural plans, renderings, and possibly a show home or model unit. The advantage is that off-plan properties are often sold at a discounted price compared to the market value of completed homes. Additionally, buyers may have the opportunity to customize certain aspects of the property, such as finishes and layouts.
2. Research the Developer
The reputation and track record of the developer are crucial when buying off-plan. You want to ensure that the developer has a history of completing projects on time and to a high standard. Research past projects, read reviews, and consider visiting other developments by the same developer. A reputable developer will provide more confidence that the project will be completed as promised.
3. Review the Development Plan
Carefully examine the development plan and architectural designs. Look at the layout, size, and features of the property, as well as the overall design of the development. Pay attention to the location, amenities, and any future infrastructure plans in the area that could affect the property’s value. It’s essential to ensure that the property aligns with your needs and investment goals.
4. Understand the Payment Plan
One of the key benefits of buying off-plan is the flexible payment plan offered by developers. Typically, you will need to pay a deposit upfront, followed by staged payments during the construction process. Make sure you understand the payment schedule and ensure that it fits within your budget. It’s also important to clarify what happens if the construction is delayed or if there are any changes to the original plan.
5. Secure Financing
Before committing to an off-plan purchase, secure your financing. Pre-approval for a mortgage will give you a clear understanding of what you can afford and streamline the buying process. Some developers have partnerships with banks that offer favorable mortgage terms for off-plan buyers. Ensure that your financing is flexible enough to accommodate any changes in the timeline or property value.
6. Conduct a Legal Review
Engage a qualified real estate attorney to review the contract and all related documents. The contract should clearly outline the terms of the purchase, including the construction timeline, payment schedule, specifications of the property, and what happens if the project is delayed or altered. Your attorney will help ensure that your interests are protected and that you fully understand your obligations and rights.
7. Inspect the Property Upon Completion
Once the property is completed, conduct a thorough inspection before finalizing the purchase. Ensure that the property matches the specifications agreed upon in the contract, and check for any defects or issues. It’s advisable to hire a professional inspector who can provide a detailed report. If there are discrepancies or problems, they should be addressed by the developer before you take possession.
8. Be Aware of Potential Risks
While buying off-plan can offer significant financial benefits, it also comes with risks. These include potential delays in construction, changes to the property design, and fluctuations in the market value. It’s important to be aware of these risks and have a contingency plan in place. Understanding the developer’s track record and carefully reviewing the contract can mitigate some of these risks.
Conclusion
Buying a property off-plan can be a smart investment strategy, offering the potential for significant returns and the chance to own a property tailored to your preferences. However, it requires careful research, planning, and a clear understanding of the risks involved. By following these steps and seeking professional advice, you can navigate the off-plan property market with confidence and make an informed decision that aligns with your financial goals.
