Off-plan property has both its pros and cons, however it is one becoming a very popular investment option. If you choose your off-plan investment carefully, you're sure to benefit from high yields and a level of flexibility that is rare to find in standard property investment.
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Hi, welcome to Ask Johnsy, a series of videos that delve into the life of an investment consultant. Please hit the subscribe button below so that you’ll be informed of all future videos in this series. Let’s look at today’s question, which is:
“Why should I buy off-plan?” – Carol, Aberdeen
Thank you, Carol, that’s a great question, why buy off-plan? Yeah well, the main difference is that you can’t see what you’re buying. So, you’re there taking a risk really on what it’s going to look like. You don’t know what the quality’s going to be like. You’re really relying on the developer’s pictures, images, brochures, descriptions, specifications. So, you’re relying on the contract, you’re relying on the plan.
The other thing is, you don’t know when to apply for your mortgage. So, you know, that mortgage might expire in 3 months, the property might not be ready for 12 months. So, you’re really going to have to make sure that you’re going to be able to finance it. There’s no way of doing that through the current structure. So, you’re going to have to make sure that you’ve got a decent credit rating and that you maintain your decent credit rating, and that your mortgage provider thinks that there’s a product in place for that.
Also, there’s a risk of late completion, that’s the biggest one. A lot of developments are late. So, normally, sort of, 3-6 months late in general. Also, I mean a lot of people are worried that they’re going to lose their deposit. You can mitigate that by buying at a later stage when there’s more sales done and the developer’s reached his critical mass. There’s also a danger that you miss out on another opportunity. You know, you commit to one, another one might come along that you might miss. So, they’re the cons.
The pros, you get staged payments generally, so you can spread out your payments across a period of time. Maybe you’ve got bonuses coming in that you’re going to be able to make those payments for later on in the year. You don’t have to pay everything upfront. Also, you’re putting it on smaller commitments, so, you might be only putting 10, 15, 20, 25% down, but actually you’re going to get the growth on the full price. So, if it’s a 1-2 year build time, you’re going to get the full growth from the full price from that time, but you’re only putting a smaller amount of money in.
Also, it’s a good way of picking the best positions and the best aspects, the best views. You know, those people who buy early into the development, get the pick of the best units. You’re also going to get the best price and the best incentives. Generally speaking, you know, developers will offer an incentive for early birds. So, they’re the pros of buying off-plan. That’s why, you know, we prefer to buy off-plan because we think it maximises your ability to make money. Thank you.
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