New Developments, Off Plan or buying for Investment
New build and buying off plan with Indigoworld offer tremendous opportunities for buyers who are looking to maximise their return on investment - whether you intend to enjoy your new property and live in it as your main residence or whether you intend to rent it, or sell it. There are really great bargains to be had and profits to be made. The only downside is that you might have to wait a while before you move in !
New build and buying off plan are appropriate to buyers who are looking to maximise their return on investment - whether they intend to use the property
and live in it as their main residence or whether they intend to rent it or sell it on.
When deciding to buy a property for investment you need to focus on two things: where and what to buy.
- Is this country, region and property somewhere that other people will want to be in the future ?
- How do I want to make my money – from renting out the property or by selling it ?
In other words, you need to consider location and returns. An analysis of all the relevant factors should enable you, with the help of a little expert advice, to make the right decision !
We can advise you objectively on a range of investment choices, and provide opportunities to buy off-plan for even more gains.
Location
Apart from the obvious things like the weather and the scenery, you need to ask some very specific questions about your chosen location.
- Are there plenty of recreational opportunities ( beaches, golf-courses, mountains, shopping ) nearby ?
- What child and family-friendly activities are on offer ? Florida obviously is the best example of this, but the Spanish Costa del Sol also has theme parks and attractions.
- What are the plans for golf courses in the area ? For example, the Costa del Sol and Portugal are well-known for their abundance of courses, but Morocco, Dubai and the eastern emerging countries are fast catching up.
- Is it close to growing urban centres and an airport ?
- Is there commercial investment in the area eg are new hotels, conference centres etc being built ?
All this should give you an idea of how popular your choice is likely to be and how likely your investment is to increase in popularity.
Accessibility is key, but you need to look at what it will be like in 3 or 5 years time.
- Are new roads being built ?
- Are regional airports being developed ?
- Are budget airlines looking to add this location to their destinations ?
For example, the north coast of Morocco is currently not particularly easy to access, but the Moroccan government, as part of its drive to increase tourism, has guaranteed to provide the necessary infrastructure projects to connect the coastal resorts with the rest of the country and Europe by constructing 1,000 kms of new roads, increasing internal and international flights, and developing new regional airports. Bulgaria has a brand new second airport and is fast developing it´s infrastructure to coincide with the introduction of the euro in 2010.
Look at historical trends. These are likely to continue, albeit in a modified form. Spain should always remain popular with its predictably good climate and good infrastructure but is now having to compete with new emerging markets like Bulgaria, Poland and even further a field like Uruguay.
In the first instance we strongly recommend you employ the services of a lawyer based in the area of purchase. Laws vary greatly by country and sometimes by region within that country hence the need to select a lawyer who is very familiar with the area.
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. Remember to check that any payments you make a guaranteed by a bank.
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 / £ 120,000
Deposit Payable : € 52,500 / £ 42,000
Assume the property is sold before completion for € 202,500 / £ 162,000, ( not an unusual return over say an 18 month to 2 year planning and build period ) then profit = € 52,500 / £ 42,000.
This leaves a profit of € 52,500 / £ 42,000 or a 35% return.
Indigoworld would be happy to discuss specific new build projects across all featured countries.
Rental income versus capital appreciation
How do you intend to make your money - from rentals or from selling the property, either quickly or in several years time ? Both have tax implications which need to be considered in the light of local legislation.
The rental returns from a property need to be carefully assessed and not over-estimated. Rentals are never guaranteed over the long term, and you should be careful not to take on something which you may struggle to pay for when it is not rented out. Look at local supply and demand.
Security
30 weeks rental per year might be a reasonable expectation; this could produce a net return of about 6 - 8%, but also means that the property may be empty for 22 weeks per year. A secure development would mean you do not need to be concerned about leaving it unattended, however thought should be spared for security over the time the property is left unattended.
Maintenance
Another issue is keeping the property in rentable condition, so you will need to organize (and pay for) some sort of property management in your absence. Will the developer provide this, or will you need to source a cleaner and gardener yourself ?
Capital Gains
If you are looking at selling the property, you will need to consider the current capital gains situation in the specific country. For example, in Spain, capital gains tax ( CGT ) for non-residents has reduced from 35% to 18%. In other countries capital gains could increase. The advice of good reliable tax advisor is a prudent investment. |
New Developments
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