Many developers in Portugal offer beneficial payment schemes. Off-plan property allows you to purchase at the lowest possible price, before the development’s construction begins. By the time the property is finished, prices rise due to market forces and the greater general appeal of a completely finished property that is ready to move into. Investors then sell the property on to another property purchaser and, in so doing, enjoy some excellent returns of between 15% to 60%, whilst never having paid the full purchase price. Depending upon the down-payment and speed of construction, profits from off-plan deals can range from a staggering 40% to 100% per annum.
Investors should however exercise due diligence and choose wisely, making sure that the property is located in an area where they will resell quickly and easily or where there is a high rental demand for their buy-to-let option. With an off-plan investment, even in the “worst case” scenario if the property cannot be sold upon completion, the final balance due can often be financed by the developer himself, typically over 4 years or more. Furthermore, the rental income may pay off the finance of this loan and yield further eventual return on investment.
How can property be cheaper if bought off-plan – How does it work?
In order to limit financial risk and debts, the developers of any project will wish to sell units off-plan. They understand that if buyers cannot see a physical property at the beginning, they will demand a lower price, while relying purely on the developer’s reputation, the property location, artistic impressions and computer simulations on which to base their decision to purchase.
In addition to the excellent off-plan price, some highly beneficial finance structures are in place. You sometimes need to pay only around 20-40% of the purchase price in the form of a deposit, while the rest is payable upon completion. This may be financed by a mortgage if necessary.
If you decide to invest in off-plan property, you will need to decide which strategy you will adopt to achieve your return on investment. It is important to choose the most appropriate plan, creating an investment programme suitable to your needs, whether this is “pure investment” or a “buy-to-let” strategy.
Maximizing Profit From Off-Plan Investment in Portugal
- Purchasing early
Prices never remain low for long and, as construction progresses, prices begin to rise steadily. It is important to buy as soon as possible during the early stages of development when prices remain very competitive but are already beginning to rise. Early investors will invariably see the greatest returns.
- Purchasing the best units
Early purchase allows investors to choose the most sought after properties on any given development. The best units always offer higher capital appreciation in the shortest time frame and can often demand the greatest rental incomes. Penthouses are always firm favourites.
- Price increases as development matures
As the construction commences, the value of the units begins to rise. A completed show home is normally available for viewing at this stage, while buyers are taking less of a risk as they now do not need to rely 100% on plans.
- Price appreciates as more units sell
As more units are sold, the price of the remaining units rises. Units sell faster when buyers are able to physically see them. There is often a phase payment structure in place which mirrors the increasing value of the properties. To the early investor this means that, should you decide to sell your property, it will be worth considerably more at this stage than when you made your initial purchase and paid the 30% deposit.