An off-plan investment is a great and adaptable option for private investors that is becoming popular worldwide. Both the UAE and the UK offer established sectors where private investors can gain high performing, long-term returns. Investing in these sectors does come with some risk.

South Asia, particularly Vietnam, offers substantial opportunities to take advantage of the downturn in the markets in the year 2019.

What is off-plan investment?

An off-plan investment strategy consists of purchasing a property before it has started construction. Once construction is complete, rather than living on the property, the investor will either sell, hold, or rent out the property for supplemental income. Many of these investment opportunities exist. But before an investment is made, a priority for the investor should be to clarify with an independent and qualified professional, what risks are involved.

What’s a key advantage of off-plan investment?

One of the major benefits of being in an off-plan investment is you get to decide on how much involvement you will have in the project. If the goal is to buy an off-plan to receive rental income, you don’t have to do all the work yourself. Many companies, such as those who manage the furnishing of the property, and established management companies, can take advantage of buying in bulk. This counts for heavy discounted deals.

Will I need a deposit to kick off my off-plan investment?

Each investment can be different but one of the major advantages of an off-plan investment is the down-payment system. The benefit is that instead of one large deposit, you can do fragmented payments. This plan allows you to pay in regular installments. In the UAE, for example, instead of having to pay the 25% deposit, you can use a down payment plan.

Can I get a mortgage for my off-plan investment?

It is possible to get a mortgage. In the UAE, Rakbank, Noor Bank and UAB all provide mortgages for these types of investments. Due to these investments carrying more risk than traditional mortgages, the investor can expect to pay a higher interest rate than those who purchase traditional mortgages. The rate can vary based on how close the project is to completion and which developer is involved. The closer the project to completion, the less expensive the mortgage is.

What sort of prices am I looking at for off-plan property?

As with most investments, the risk is factored into the price the investor pays. The higher the risk for the buyer, the lower the price will be. An off-plan investment is cheaper than purchasing a traditional property because the construction of the project has yet to begin. Major risks of off-plan investing are: that the project may not even be built, the construction date may be delayed or your expectations for the property are not met. To lower the chances of these risks becoming reality, investors should select known developers with a good reputation. The trade-off is that working with these developers will result in higher prices for the investment.

Can I sell my investment in off-plan property?

You cannot sell the investment until the property has been fully constructed. There is no established market in off-plan investments, which makes this a very illiquid investment.

Is buying off-plan better than buying bricks and mortar?

The benefit of purchasing bricks and mortar is “opportunity cost”. The  opportunity cost of an investment is how much your money would have been earning if it had been invested elsewhere. For brick and mortar, there is little to no opportunity cost because the project has already been completed. Generally, the opportunity cost is 5% per annum. With off-plan investments incurring a high opportunity cost, an investor could instead opt to invest their money in a high-interest savings plan.

If you’re interested in knowing more about off-plan investments, contact a Winson Capital representative by completing this form

Contributor: Chris Cagol

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