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What to Look Out For When Buying Off Plan
Buying Off Plan
It can be difficult to decide when every deal seems to be not to be missed!
There are some key things I look for when buying off plan, whether it's in the UK or abroad it makes no difference.
The property must be good value now ie it compares favourably with similar properties today, and is not based on properties going up in value 10% each of next 2-3 years.
Supply and demand - this is vital. What is current supply and demand? What will it be when complete? If market is already looking saturated now, will it be any different in 2 years? What development is planned in area in the meantime?
Market forces - will demand grow? Decline? Who is the market? Young professionals, holiday makers?
Interest rates - what are current interest rates? Are they likely to go up/down?
Tax efficient/costs - Tax can often be your biggest expense. What are property taxes like in the country looking to invest in? What is most tax efficient way to buy ie joint names, limited company? What are other taxes like? Eg Capital gains tax, wealth tax, inheritance tax, income tax.
Location - obvious?! One development may be 20% cheaper than another, why is that? Which will go up in value by more? What attractions/amenities are there now/will be there on completion?
Payments - what is payment structure? Is this best way to leverage your money?
Independent lawyer - would always get an independent lawyer from the developer. Once have a good lawyer can trust, stick with them!
Does price cover everything? - eg air conditioning, swimming pool, car parking?
What is economic situation in country? What is likely to be over next 18 months-2 years? Is it stable?
What is size of development?
What is the build quality like?
What is the size of developer? Are they likely to go bust? If they go bust is your money secure? How long have they been around for?
Will the developer keep in contact during build period? Will they help with your strategy/exit strategy?
Exchange rates? If have bought in a foreign currency, what is likelihood of changes in exchange rates? Can you minimise the risk?
And once have asked all these questions should help form an answer!!
As with any property purchase, you should be pleased with the value when you buy, and also have an idea of the way the market is going over the build time - you do not want to have a BTS strategy and get to completion date to find out no-one wants to buy your property at the price you hoped for, as supply outweighs demand, or get hit with higher tax bill than expected. Or go in with a BTL strategy and then find out yields are much lower than you need to cover costs. This may seem obvious, but many people make these mistakes.
Alan Forsyth is a full time property investor and developer with 10 years experience in UK and overseas. He is managing director of http://www.property-investment-tips.com which offers free independent advice and tips on property investment, courses, countries, strategies, mortgages and much more - with a free newsletter every 3 weeks giving latest tips and offers to over 500 investors. Sign up today at the site for free independent advice!
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