As an American living in Europe, no word had crept into my English dictionary, which tend to confuse my fellow countrymen. One of these words SMS (aka text messaging), and the other off plan. conversation between the British and most other Europeans when speaking in English on the property often becomes centered around that concept. For the past few years, in fact, one might even say he has become a buzz-word in the European real estate investment.
In recent years billions of euros invested in these types of properties mainly Europeans looking for second homes and investment opportunities that offer higher potential returns, then they can usually be found in this country.
This model is equally plausible strategy for North American investors to acquire investment properties in the top destinations in the world of investment that can offer a much higher return than in many parts of America.
What exactly is the off plan?
In simple terms, off plan property is one that is net yet finished building.
Normally, the 'off plan' offered in an apartment or condominium complexes or the development of houses or townhouses.
Buyer "reserve" assets or property development located in one of a number of different stages from planning to completion. (details of the purchase process are described further along in this article .)
Off plan opportunities exist in many countries. the most popular and profitable as Turkey, Italy, Bulgaria, and Romania. They are mostly representing companies that oversee the development of the project on a daily basis to the investors and to provide various services such as mortgage assistance and asset management after development was completed.
Why off the plan is considered as an attractive investment consideration.
One of the key why buying 'Off Plan' can be such a good investment lies in the fact that normally only have to pay about 30-40% of the purchase price as a deposit and then often nothing until završetkanekretnine, when the rest of the can be financed in 60-70% of the mortgage (but the number of off-plan came in 3 to 4 payments ).
In this model the game in the practical application can be seen in the example below:
Purchase Price: $ 100,000 (September 2006)
Deposit paid: $ 30,000
Suppose you sell the property in September 2008 (assuming the maximum waiting period for almost any off-plan project) immediately prior to completion and will sell for $ 130,000 (it was much lower return than what was achieved in the past few years). Your profit is $ 30,000 which is obviously the $ 100,000 asking price 30% return, but remember, all you had to pay a $ 30,000 deposit, so the real return on money invested is 100%. You've doubled the money you invest.
Many people are also financed through a 30-40% deposit by releasing equity in your existing property, and so really should not have any liquid cash to take advantage of this profitable investment opportunity.
As you will learn in this article, however, these are just some of the many reasons why off plan offering is so attractive. Tax incentives, capital growth expectations, and the rent-ability also play an important role.
Why does it offer developers?
developer is obviously very keen to sell as many properties as early as possible to minimize risk to themselves and to obtain better interest rates on their loans from development banks and investors. To help sell properties at this early stage prices are normally extremely competitive for the reasons above and because it is often little to show prospective buyers, but the floor plan and artists impressions completed development.
Liquidity is also a major consideration. I recently met with one such developer here in Bucharest, Romania. He was keen to sell 10 apartments in a village still unfinished apartment complex at significantly reduced prices to acquire money to purchase adjacent land for future development.
What are the potential risks?
The biggest potential risk is the most obvious. property becomes part of the development never ends. The best way to ensure that this does not happen to buy from a reputable vendor with a solid track record of the past and the developer with a similar sterling record. Some plans are offered in the development of which have close relationships with banks even offer mortgages available to cover even the first payment. This is another sign of the credibility of the bank's ability to a particular project.
Of course, an early investor in the project gets the more risk he or she is technically over. It must be fought against the higher profits that come from having May in the lower entry level, which should be below current market value.
How is such a high return as possible?
The following factors help increase the value of the development during and after construction:
1) less than the 'market' prices offered by the developer in the beginning.
As already mentioned, the developer wants to sell properties as quickly as possible, so prices are usually very competitive.
2) The best properties are sold in the first place.
Normally when he issued the development pattern appears, ie penthouses, corner units and ground floor with private gardens tend to sell first which then leads to price increases.
3) Show home available / start construction.
Once the main structure of the development begins to take shape and / or show home is opened prices normally increase substantially as prospective buyers can see more easily what the finished development and individual homes will look like.
4) More units sold.
As a developer starts to sell more properties the original prices will continue to grow, which obviously means that if you want to sell your property will obviously be worth more.
5) reached final completion.
After you completed the development will be the owner of a brand new apartment / house in new development. A person who wants to buy at this stage would be willing to pay significantly more for somewhere they can move in or rent out immediately rather than when the development was just a plan on a piece of paper, and land or semi-constructed dwelling.
the reasons listed to explain why prices should increase the development is built. It is not uncommon for property to be bought and sold again before a brick has been laid and even sold a few more times before final completion.
NO capital gains tax
One of the reasons for the popularity of selling before completion is that there is no capital gains tax payable at all if you make a profit, however great the sale before completion. It is a form of "property flipping .'
Capitol FUTURE HIGH GROWTH OUTLOOK
When you buy off-plan property at the right price and in the right places high Capitol growth can be expected. That is why developing countries such as Bulgaria and Romania, received a good deal of off-plan investment business.
Capitol growth in average 17% last year in Spain, while Turkey is on average 34% growth overall.
Depending on the time frame that you want to hold onto the property, you will need to decide whether to flip their property prior to completion and avoid Capitol gains taxes or hold on to your property and reap the Capitol likely gains and capital growth you will receive to hold the investment for a longer period of time.
Also, as so many off plan properties are located in the place of destination, you will have the ability to go at all costs, which amounts to paid vacations as often as you like and leave the property management company to hire our own assets on a daily, weekly or monthly basis, creating an additional income stream which will help pay the cost of investments, including mortgages.
cold hard numbers
Suppose that you buy off plan and benefit from a modest 15% savings compared to current market value of the property and reap a below average 10% annual growth rate of Capitol during the two years during construction.
off plan investment cold hard numbers
such as
Assuming a purchase at $ 120,000, which represents the price 15% lower than current market value.
General Pictures
Sale Price: $ 120,000.00
Automatic Gain vs. Current Market Value: $ 18,000.00
the cost of:
Possible 2% Brokerage Agent Fee: $ 2,400.00
30% Deposit: $ 36,000.00
Legal Fees: $ 1,200.00
Mortgage broker fee 1%: $ 1,200.00
Total $ 40,800
Capitol growth at 10% a year, 2 years on the market value of $ 28,990 Price
Get a chance to purchase $ 18,000
the total profits in the last 2 years
$ 45,400
The percentage of return on investment (the cost) 226.45%
This is one of many models to get off the plan investments. You can put down a higher deposit, or have less waiting time for construction to be completed, but on the other hand, benefit from higher growth in the Capitol. Or, you can choose to keep their property after construction is completed, thus paying the entire cost of ownership, but between the Capitol and the rental growth also see a huge profit.
Off plan closer to completion of Phase
off plan properties that are relatively close to the end of the
The best thing about these options is the increased piece of mind that your property is part of a real and viable project.
While the above-profit models will be somehow different from those used above are not necessarily any less compelling. I'll still be buying at less than market value cost, and you'll be able to reap a profit rent in a shorter period of time, or soon to sell at a higher price. You will also have a shorter waiting time to do a flip on the sale, if you want to take that path, or vice versa to move in.
off plan stage with a 3-4 stepped payment plans
number of projects, especially those with a shorter waiting time for completion of the required payment in stages 3-4, with an average payment of the next few months after the first payment is made.
You are the chances of securing a mortgage on the secondary payment should be more likely due to the advanced stage of development and can be assumed then quickly a new buyer should you decide to sell property near the endpoint. Otherwise, wise, your rental income can begin to cover these payments in a relatively short period of time.
Also, they require more developers stage payments can be compensated for this request with a particularly attractive purchase price.
it all really comes down to how strong a particular offer. You May be getting in at an extraordinary price, or in particularly hot project, with increased profit potential, which makes increasing demands worth paying.
Then again, it might not be.
By seeking a qualified guide in this process, you'll know what off plan investment is right for you.
recapping some of the strategic advantages of investing in off plan:
O you always buy below the current market value ensures automatic profit
O you benefit from growth in asset value, while developments in the building without paying full cost of the property
The ability to avoid capital gains tax
O takes a little time and effort on your part
O invest in regional hotspots without leaving your home, but have the potential vacation getaway.
The ability to "flip" the property after putting down as little as 30%
A property management company can rent your property, creating a regular stream of income / repayment mortgage on the property.
in Romania, where my offices are based, it is not uncommon for an apartment building complex to be 70% sold before groundbreaking. The reason is very simple. apartment bought off-plan in a beautiful, new building in desirable location can be bought for less than one run-in "Soviet-style" concrete block. Customers are willing to wait as the new apartments already completed buildings are available only at premium prices. As this market develops, the Capitol growth has and will likely continue to occur at a staggering rate. Informed investors know this, and this is the reason that half of all investors in off plan here are foreign.
Each market is different and motivated by similar features. Although, I am particularly inspired by the opportunities available to off plan opportunities in Romania, every investor must consider his or her personal needs before making a final decision. As you are buying off plan can also be lower input costs for those who want to have a second home in Europe or elsewhere, there are those investors who will want to buy in the area or areas that are most appealing to them, and offers a solid return on investment. They are motivated strictly certain profit targets investments in the short or long term holding will want to make there decision based solely on an active market factors.
Smart off the takeover plan will provide you with the opportunity to take advantage of investment opportunities, stay liquid, and get the highest possible realization of the world's hottest investment locations with the littlest possible stress.
It's all based on the principle probably learned in elementary school, "Early bird gets the worm." Off Plans are juicy "worm" in the housing market.
, due to technical requirements of parts of this article, including the cards are removed, please contact the author for more information.
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