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New Builds and Off Plan |
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Buying off plan means reserving a property - sometimes before commencement of the build. Developers like to sell as many as possible before starting the work in order to protect themselves and in some cases to earn more favourable bank rates. In this respect if you are one of the early purchasers it is always advisable to try and understand the lead time before building.
Very often developers do not start before 70% of property stock has been reserved but this does vary by country. In return for this " inconvenience " prices are virtually always more favourable than buying a completed property or a resale. Remember, if you prefer to wait until you can physically see the construction it will normally cost you more.
Prices will still move upwards during the course of the build, so the sooner you can decide the better value it is likely to be. Once you have decided and signed the contract irrespective of the build stage the price should be fixed.
One of the main advantages to buying off plan is that frequently ( and again this varies by country ) you need only pay around 30% to 40% of purchase price and often very little until completion. The balance can either be settled by cash or a mortgage which is often built into the purchase price.
In some cases, subject to the conditions of purchase, the contract will enable a buyer to sell the property before completion after having paid in some cases only 30% to 40% of the purchase price.
For example :-
| Purchase Price : |
€ 150,000 / £ 100,000 |
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| Deposit Payable : |
€ 52,500 / £ 35,000 |
Assume the property is sold before completion for € 202,500 / £ 135,000, ( not an unusual return over say an 18 month to 2 year planning and build period ) then profit = € 52,500 / £ 35,000.
This leaves a profit of € 52,500 / £ 35,000 or a 35% return. |
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