Buying Off Plan
Historically a developer would purchase a plot of land and then proceed to build on it, either using his own or borrowed capital, seeking to sell on to the end owner-occupier on completion. More recently developers have realised that by selling off-plan – literally whilst the plot is still a green field site, with not a single brick laid – they can use the end-buyer’s money to part-fund their project, in addition to creating lots of ‘sold’ stickers on their site plan, which in turn encourages further buyers, and also reassures their lending banks.
Typically the developer will release properties for sale on the basis of a down payment of 30% of the purchase price, with the balance of 70% to follow on completion, say 2 years later. In order to ‘pump prime’ these sales he will also release the initial phase of the site at a significant discount – typically 20-30% - on the final sale price (still off-plan).
Clearly, if the investor is being allowed a price discount that itself is of the same order of magnitude as the amount of deposit money that is actually required, then a capital gain of 100% is automatically generated, Add to this the overall market growth expected during the period of construction, and it becomes apparent why this method of investment has such tremendous potential, especially when it is also realised that, by buying early, it is also possible to ‘cherry-pick’ the very best-located units on the site. Often the early buyer will receive more favourable payment terms as well.
Visit our 'Investments Calculation' page to see how the investment return is obtained.
Note that all parties in the transaction are happy with their deal – always a sign of a good business proposition. The developer is quite willing to offer a proportion of the site at a discount, for the reasons outlined above. The end-buyer, who is effectively ‘buying with his heart’, as a long-term investment, needs to see the finished product before committing his money, and is quite happy to trade this certainty for a higher price. We, the off-plan investors, ‘buying with our heads’, make our profit by assuming the risk of buying somewhat into the unknown. However, if you have the experience to understand what you are doing, this risk is minimal, and the investments returns are vastly out of proportion to this risk. Note that there is nothing to prevent our investors becoming end-buyers, if they like the look of how the investment has turned out.
Many of our investors are either remortgaging, or outright selling off, their UK investment properties in order to invest with WMPM in Spain. If you are interested in remortgaging your property let us know, as we can introduce you to excellent sources of finance for this.
Hence what WMPM specialises in is the management of investment capital on behalf of investment clients. These may either be wealthy individuals, investing of the order of £¼ million upwards, or, more usually, investors in one of the pooled funds that we manage. These are essentially set up along the lines of a unit trust, and WMPM takes on the entire responsibility for both running the investment company concerned, and for all of its investment decisions, from selecting the very best developments in which to invest, through monitoring their progress during construction, through to their eventual sale onwards.
Brief details of existing developments that we have bought into on behalf of clients can be seen by following the link Existing Investments, while their updated and ongoing construction and financial progress may be monitored through our Members' section.
Property Management Ltd