Are the days of making serious money from off plan investment property over with? Is there a right time to buy off plan properties? These are some of the question we will try to answer on this web page.
Let’s get straight to it. Bottom line is that off plan investment property is just the same as any other property. Property is property; people need a place to live and to call home.
Are the days of making serious money from off plan properties over with? Put simply, NO! There are many people still making a killing on off plan property, there are also many people making huge losses.
So what separates the successful from the not so successful? – Now you are asking the good questions.
You need to know what you are doing when you deal with off plan investment property and need to be aware are things like forward pricing and also be prepared to do your own independent research to find out if a deal being offered to you is a profitable deal or not.
On any given day there are generally lots of adverts on the radio talking about how different individuals are making tonnes of money buying off plan investment property. They detail how they bought “X” amount of properties in six months that are now worth over a million pounds etc. etc. etc. We would advise you to tread carefully with these companies.
What can happen all to often is that these companies promise large discounts of say between 15-20% off the off plan properties. They say they get this discount because they buy in bulk and have a special relationship with the developers. They say that because of this special relationship and discount this is how they are able to pass a discount on to you.
Properties bought in this way have an inbuilt problem. A large percentage of them are sold to property investors. So when the time of completion comes, what do you think happens? In an apartment block twenty-five identical properties that have been bought by property investors all come to completion at the same time.
Thirty percent of the investors that bought these properties want to sell their property straight away, but they have to compete with each other as to who gets the sale. The buyer has the upper hand (never a good situation).
The buyer can pick and choose and take his time over which property to choose. How do you think these investors get their identically dimensioned properties to stand out in the crowd? Well one of the ways is to lower the price – HMM, we are already unto a loser aren’t we.
Guess what! What about the other investors, what are they up to? Well, they want to rent their identical properties out. They are stuck with the same sort of problem. Lots of identical properties to rent all come to the market at the same time. This time the Tenant has the upper hand. And what is one of the main ways these investors use to distinguish themselves from the crowd? Yep, they lower the price.
This is a very dangerous situation to be in as rental cover is notoriously low on new builds anyway. If you start putting discounts into the equation you very quickly get into a situation where an investor has to top up the mortgage by a few hundred pounds a month.
Who has the power in both these situations? Well, its not you as the investors that’s for sure.
The other thing that the companies that sell this type of discounted off plan investment property don’t tell you is that even though you might be able to buy properties valued over a million pounds in under a year; you have mortgages on these properties of about £850,000. And as I said earlier the rental cover on these properties are generally slim or none existent.
I think you get the message – a couple of small interest rate rises and you will be filing for bankruptcy.
Don’t get disheartened though, as we mentioned at the beginning, many people are making lots of money from off-plan property check out our off plan properties page for more info on how.**Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.