Investment Calculation

On the day of release the developer will offer a number of incentives to investors who have indicated a willingness to make a substantial commitment at this stage. Such ‘favoured clients’ will be those who, like ourselves, have demonstrated a significant buying power, in addition to a professional understanding of the market, and hence reliability.

The ‘day one’ incentives offered might typically be as follows:

• A discount of up to 30% on the developer’s official sale price. This in itself provides an excellent ‘cushion’ against possible overall market weakness.

• Preferential payment terms (individual private clients are often required to make additional stage payments)

• A choice of the best properties on the development – those which will show the greatest returns once the development is completed and open market sale conditions apply.

Once these original investors have purchased these prime properties, the developer will then offer the development to the general public at progressively higher prices, and indeed, if the project sells particularly well, the original discount of 30% may well turn out to be exceeded.

Let us assume that the developer’s official sale price is £100,000. on which price he will allow a discount of 30% to pre-release purchasers. During actual construction assume that the general market rises by a further 20% (a very conservative estimate, based on recent experience). Then we have the following calculation:-:

This profit of £40,000 is equivalent to a profit of 167% on the £24,000 originally invested. The real-life calculation is somewhat more complicated than this, since legal and sale fees need to be taken into account, together with VAT and so on. However it can be seen that an investment return in excess of 100% - in a build period of, say, two years, is not an unreasonable expectation.

We ourselves, together with our existing investor clients, have already invested over £10 million in off-plan developments and hence have the buying power and established relationships required in order to take advantage of these profit opportunities

This latter element is where our own experience plays a major role. It would be possible to give many examples where two similarly located developments started off at similar asking prices, but on which radically different market prices were found on completion. As in all property investment, the three key factors to consider are: Location, Location, and Location

Since we are actively investing in this market on our own behalf we keep an exceptionally close ear to the ground in the area considered (basically the Costa del Sol from Sotogrande in the west to Nerja in the east – there are excellent reasons for choosing this area over, say, the Costa Brava, which we can elaborate on, on request). We would hope that the above theoretical price development, whilst realistic, could actually be well exceeded in practice.