Off-plan property investment, where you purchase a property before its fully constructed appears to be one of the most profitable real estate investment strategies investors use globally. In regions like Nigeria and other developing nations, this approach is gaining popularity due to its cost effectiveness and the potential for appreciation in value. However, just like every venture, off-plan property investment does not come without its drawbacks.
In this article, we will delve into the benefits and pitfalls of investing in off-plan properties.
Off-plan Property Investment Benefits
- Securing a Property Below Market Value: Opting for off-plan purchases enables you to acquire a property at a price than its market value. Developers often offer this incentive to generate interest or sell units prior to completion.
- Reduced Deposits and Flexible Payment Schedules: Some deals let you pay in stages, easing the financial load. Instead of a big deposit, you can spread payments, like paying 40% before completion.
- Enhanced Flexibility: It affords you time for planning. For example, if retirement is approaching, you can secure your retirement home without stress, and move in upon completion.
- Personalized Touch: Whether for use or resale purposes, investing in off-plan properties grants you the opportunity to customize your property. You can communicate your preferences with the developer, an option you don’t get with ready-made homes.
- Potential for Profit: Typically, property values tend to increase over time. Therefore, purchasing an off-plan property could result in it being valued higher by the time it is completed.
- Brand New and High Quality: Your property is newly constructed with mostly high end materials, contemporary fixtures and smart home technology. This means that there won’t be any maintenance expenses anytime soon, and new properties often command higher rental rates, which can boost returns for investors.
- Rental Earnings: Even if you’re not physically present in Lagos, owning a property there can generate rental income. Lagos is a hot property spot which ensures a constant flow of tenants and steady rent.
However, there are drawbacks to consider when investing in off-plan properties:
- Quality Concerns: There is a risk that the quality of the property may not meet modern standards. Developers may not disclose reasons for selling before completing construction, potentially indicating issues with the property.
- Legal Challenges: Investors face legal complications such as property entanglements in court cases, or fraud investigations involving government agencies like the Economic and Financial Crimes Commission (EFCC). This could result in the investors losing their money.
- Use of Inferior Materials: Builders might compromise on quality by using substandard materials to cut costs. The chances of the building collapsing or requiring repairs in the future are higher due, to this.
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Investment tips for minimizing off-plan property risks:
- Research Thoroughly: Before making any investments, conduct an investigation into both the property and the developer. Ensure that everything is legitimate.
- Go for Well Established Developers: Choose developers with a reputation and proven track record. They are more likely to fulfill their commitments and offer high quality properties.
While investing in off-plan properties can be lucrative, it’s crucial to exercise caution and conduct research to avoid any pitfalls.