What is Off-plan investing?
With the demand for real estate in Lagos at an all time high due to the increasing housing deficit, developers are adopting several strategies to provide affordable properties.
Selling off-the-plan properties is one of these techniques. Off-plan investing, while not a new type of real estate investment, has exploded in popularity in recent years as investors see it as a viable method to diversify their portfolio.
While both residential and commercial real estate can be bought off plan, it is more common in residential real estate.
So, what precisely is off-plan development, what are the advantages and disadvantages, and how can an off-plan investment strategy be made safe? In today’s post, we’ll answer all of those questions.
DEFINITION OF OFF-PLAN
The term ‘off-plan property’ refers to property, which is available for purchase before it has been fully constructed or when it is still in the planning phases. To put it another way, you acquire a property while it is still an architectural drawing or on its way to being completed (for example its foundation has been constructed or the first deck has been raised).
BENEFITS OF OFF PLAN
Off-plan investing, like any other type of real estate investment, has a number of advantages. The following are the major advantages:
- Investors can have early access to a hot market, allowing them to get in before it explodes.
- Investors can purchase the properties at reasonable properties when they buy off-plan below the market value.
RISKS ATTACHED TO BUYING OFF-PLAN PROPERTIES
However, off plan investing also come with their own risks. Some of the risks involved include.
- The market might fall and hence real estate prices go down
- Developers might face financial issues
- Projects may face delays
- Construction defects
HOW TO REDUCE THE RISKS
The good news is most of these risks can be lessened quite easily. To minimalize or even eliminate the risks, here are a few things you can do.
- Do some study on the potential investment region you’re considering. Off-plan investments are an investment in the future of a neighborhood, so you want to be sure they’re worthwhile. The strongest predictor of this is the area’s expected property price and rental yield increase, as well as if it can provide large returns in the next years.
- Most importantly, when contemplating purchasing an off-plan property, always research the developer’s track record, both to gain a sense of the quality of their work and how long it took to finish. This will give you a sense of whether or not the project they’re giving is all it’s made up to be.
In our next post, we’ll discuss two methods for profiting from off-plan investments.
Till then, If you’re interested in purchasing real estate in Lagos, please contact us by clicking on the floating whatsapp or phone call button in the lower corners of your screen.