Off-plan property overseas as overseas investment property
Buying off-plan property overseas represents some of the best opportunities for those looking for value for money properties overseas. Buying off-plan will generally ensure a lower price as you are buying a property which is not yet built. For this reason off-plan homes offer some of the best overseas investment property opportunities.
What does off-plan property overseas actually mean?
Buying off-plan property overseas means you are agreeing to buy property which is not yet completed at a future date. As already mentioned, prices for off-plan property are generally lower as developers are very often seeking investors to pay for the construction of properties overseas. However, there could be a couple of years between agreeing to buy and completion, leaving you with a frustrating delay to contend with.
Advantages and disadvantages to buying properties overseas off-plan
The major advantage to buying off-plan property overseas is the cost, which makes it attractive as overseas investment property. This offers better capital gains growth possibilities. In France, off-plan property is often linked to the government leaseback scheme (LINK) which offers guaranteed rentals and potential as overseas investment property.
Other advantages to buying off-plan property overseas include:
- New technology and modern facilities in properties overseas.
- Staged payments meaning your mortgage costs increase gradually.
- Choice over fixtures and fittings for your property overseas.
There are also disadvantages to buying off-plan property overseas and these include:
- Uncertainty if developer goes bust during construction.
- Saturation of similar properties in area.
- Finished property overseas not meeting expectations.
- Inconvenience of having to wait some time before property overseas is completed.
Process of buying off-plan property overseas
When you agree to buy an off-plan property abroad you will enter into a different payment scheme. You will be required to pay a non-refundable reservation fee up front (typically from £2,000 to 5%).
In most cases there will be a first payment or deposit of 20-30%. This is called different things in different countries but is where the contracts become binding (equivalent to exchanging contract in the UK). There will also be a series of instalments when certain points in construction are reached.
If you are borrowing money to buy overseas investment property or a residential off-plan property overseas you will need to negotiate for the mortgage to be released in stages. This is not always possible so you may have to find the part payments from your own funds.
The reservation contract for off-plan property overseas
In most countries outside the UK, once you sign the reservation contract for off-plan property overseas you are fully committed to the purchase. This document should detail the purchase cost of property overseas and the payment instalments. The reservation contract should include a full description of the off-plan property overseas including its size and number of rooms.
Your lawyer should also have negotiated a number of clauses which, if not met, would result in the reservation fee paid for off-plan properties overseas being returned. These might include the off-plan property overseas not being completed by a certain date or it not matching the specifications laid out in the reservation contract.
Before buying overseas property off-plan, you should obtain a detailed description of what the property will consist of. The developer should provide you with guarantees that the construction will be completed in the event of financial difficulty. Where possible you should try and get any payments held in a "client account" at the solicitors or the developer´s bank. This will increase the chances of getting the money back if there are any problems with the developer.
Whether you are buying overseas investment property or your new home, there are a number of dangers associated with buying off-plan you must be careful to avoid.
