|
Areas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
| |
 |
 |
| |
|
|
Buying Investment Property Spain Off Plan
|
The
developer is obviously very keen to sell as many properties as early as
possible to minimise the risk to themselves and to obtain better
interest rates on their development loans from banks and investors. To
help sell the properties at this early stage the prices are normally
extremely competitive for the reason above and also because there is
nothing to show potential purchasers except a floor plan and artists
impressions of the finished development. |
| |
The real key to why buying 'Off Plan' can be such a good
investment lies in the fact that normally you only have to pay
approximately 30% of the purchase price as a deposit and then often
nothing until completion of the property when the rest can be
financed on a 70% mortgage.
For example:
Purchase Price: 100,000 euros (Jan 2003)
Deposit payable: 30,000 euros |
|
|
| |
Let us assume
that you sell the property in Jan 2005 just before completion and that
you sell for 130,000 euros (this is a much lower return than has been
achieved in recent years). Your profit is 30,000 euros which is
obviously on the 100,000 euros asking price is a 30% return but remember
all you have had to pay is a 30,000 euros deposit so your actual return
on cash invested is 100%.
Many people finance the 30% deposit by releasing equity for their
existing UK property and so do not actually have to have any liquid cash
to take advantage of this profitable investment opportunity. If you
would like advice on releasing equity or have any other finance related
questions please contact us and we will recommend you to a financial
advisor in the UK. |
|
How
is such a high return possible?
The
following factors all help increase the value of a development during
construction:
1) Lower than 'market' prices offered by the developer initially.
As discussed above, the developer is keen to sell the properties as
quickly as possible so prices are normally very competitive.
2) Best properties get sold first.
Normally when a development is released a pattern emerges, i.e.
penthouses, corner units and ground floor with private gardens tend to
sell first which then in leads to price rises.
3) Show home
available/building commences.
As soon as the main structure of the development starts to take shape
and/or a show home is opened prices normally increase substantially as
prospective purchasers can see much more easily what the finished
development and individual homes will look like.
4) More units sold.
As the developer starts to sell more and more properties the original
prices will continue to increase which obviously means that if you wish
to sell your property it is obviously going to be worth more.
5) Final Completion achieved.
Once the development is finished you will be the owner of a brand new
apartment/house in a new development with beautiful gardens and a pool.
The person who wants to buy at this stage will be prepared to pay
significantly more for somewhere they can move into or rent out
immediately rather than when the development was just a plan on a piece
of paper and a plot of land.
The reasons listed above explain why prices should normally increase as
a development is built. It is not uncommon for a property to be bought
and sold again before a brick has been laid and even sold again several
times before final completion.
One of the final reasons for the popularity of selling before completion
is that there is NO CAPITAL GAINS TAX to be paid at all if you make a
profit however big by selling before completion. |
|
|
|
