All You Need To Know About An Off Plan Investment in Real Estate

Off-plan investment refers to the process where you, the investor, buys into a new development before it has finished being built. The concept has continued to gain popularity in the Kenyan real estate market, because of the affordability of the unit prices, the flexible payment structure, and the capital appreciation gains from the unit.

Usually, you put down a deposit and pay off the rest in installments as construction continues, and in the end, you get the keys to your new property. The concept allows the developer to use the funds collected from buyers to develop the project. This thus relieves the developer of the financing cost burden they would have otherwise incurred. How does buying off-plan benefit you as an investor?

To start with, buying off-plan allows you to lock in the price. Someone who pays for a unit before the foundation has been laid will pay much less than one who comes in much later in the project’s lifespan. This is because, as it nears completion, the value of the project increases. This means that if you reserve a unit early, you can pay for it at the original low price, regardless of the payment method you choose.

Secondly, off-plan buying allows you to have a flexible payment plan. Usually, the developer will need you to make a 10 – 20 percent deposit to secure the property and pay the balance in installments. In some cases, you can even wait for the completion of construction and in other cases, the full payment can be made on the completion of the construction.

Thirdly, off-plan real estate has the potential for capital gains. Depending on the prevailing market trends, the home bought off-plan is likely to increase in value over time, given that you are acquiring a future asset at today’s price.

Finally, buying off-plan lets you pick the best location for your house. Moreover, you can also choose the finishes of the house and customize it accordingly. This is different from buying an already finished home which won’t allow you much wiggle room.

Despite the noteworthy merits of off-plan buying, it does come with some risk, including possible loss of capital if the market goes down and property prices correct, and failure of the developers to deliver. To avoid the above-stated risks, here are the factors to consider when buying off-plan the most important thing you must do is due diligence before you sign any agreement or make any payment. This involves investigating the developer’s track record and get independent valuations and legal advice.

During construction, monitor progress so that you notice any red flags early on. Above all else, due diligence ensures you get the most out of your off-plan investment having addressed the risk.