Ever heard the saying, ‘The early bird catches the worm? That’s exactly how it works with investing in off-plan properties. You can lock in a property at a much lower price than it will cost when it’s finished, making it a smart move for investors. 

Also, investing in off-plan properties is the perfect decision to make if you’re looking to customize your home to suit your taste. 

But like any good deal, there are risks to watch out for. In this guide, we’ll break down the pros, risks, and important tips to help you make the right choice when investing in off-plan properties.

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Key Takeaways

• Off-plan properties are purchased before or during construction and are often more affordable than completed properties.
• Investing in off-plan properties gives you the opportunity to customise your property during the construction process.
• Before investing in off-plan properties, know that there are certain risks that you should be aware of.

What Is the Meaning of Off-Plan Property?

An off-plan property is a building sold before it’s fully constructed. This type of property is often still in the planning or early construction stages when being sold.  In fact, you’re buying the property based on plans and designs, rather than seeing the finished building.

One outstanding thing about investing in off-plan properties is that these properties  are often sold at a lower price compared to completed buildings. This helps to attract buyers early and secure funding for the project. 

What Are The Factors To Consider Before Investing in Off-Plan Properties

As much as investing in off-plan properties sounds promising, there are certain factors to consider as a buyer before making your final decision.  

To make an informed decision, here are some things to bear in mind:

• Research the Developer
• Location
• Market Trends
• Contract Review
• Payment Plan
• Legal Frameworks
• Property Type
• Completion Date
• Exit Strategy

1. Research the Developer

Before investing in an off-plan property, it’s crucial to check the developer’s background. Ensure they have a good track record of completing projects on time and within budget. 

Look at their previous properties to see if they meet your quality standards. You can find reviews from other buyers online to get an idea of their reputation.

Also, verify that the developer has the financial stability to finish the project. Some developers run into money issues, causing delays or even halting construction. By researching these factors, you can make a smarter, safer investment decision and avoid future problems.

2. Location

When investing in off-plan properties, location is one of the most critical factors to consider. Focus on projects situated in areas with strong growth potential. 

Research market trends to determine if the location is likely to experience economic or population growth, which can drive up property values.

Additionally, look for essential infrastructure nearby, such as hospitals, schools, transportation links, and other key amenities. 

Properties in well-connected and resource-rich areas are more likely to see significant value appreciation over the coming years, making them a smart investment choice.

3. Contract Review

Make sure you thoroughly review the terms and conditions of the sales contract. Ensure the contract contains important information like:

• Completion date
• Payment schedules
• Penalties for delays.

Get help from a legal expert to check the contract before signing it, making sure everything is fair and avoiding any mistakes that could cause problems later..

4. Payment Plan

Before buying a property that is not built yet, make sure you fully understand how you will pay for it. Ask about the payment plan and check if you can afford to pay on time. Make a budget so you know you have enough money for each payment.

Also, ask if there are extra fees if you miss a payment. Knowing these details will help you keep track of your money and avoid any surprises. This way, you can plan better and stay on top of your payments.

5. Legal Frameworks

If you want to invest in off-plan properties, consult with a lawyer who is experienced in off-plan property transactions. This is to ensure that the terms of the contract are fair and protect your interests.

In Nigeria, there are some legal frameworks in place to protect off-plan property buyers. This will depend on the developer and location.

When investing in property, it’s essential to understand the laws and regulations that govern land ownership and transactions.

• Land Use Act of 1978: This plays a key role in Nigeria, overseeing how land is owned and managed to ensure fairness. It also sets clear rules for how land is allocated and utilized across the country.
• Nigerian Property Law: outlines the rights and responsibilities of property owners and buyers. It clarifies ownership details, guides property sales, and establishes the obligations developers must meet when constructing properties.

• Lagos State Property Protection Law: In Lagos, this offers additional safeguards by preventing fraud in property transactions. This law protects buyers from dishonest developers, ensuring their investments are secure.
• Title verification: To further protect yourself, always conduct a title verificationThis process confirms the ownership of the land where your project is located, helping you avoid disputes or legal complications in the future.

Understanding these legal frameworks can provide peace of mind and protect your investment.

6. Property Type

When you want to invest in a property, you need to think about what kind of property will work best for you. This means asking yourself questions like, “Do I want to buy a house or a commercial building?” “Will people want to rent this property?” and “Will the property’s value go up in the future?” 

It’s important to know what type of property matches your goals for making money. For example, if you want to sell the property for a profit, look for one in an area where the value is expected to rise. If you want to rent it out, make sure there are people looking for places to rent in that area.

7. Completion Date

It’s important that you know when the property will be ready, before investing in an off-plan property. Developers usually give a time when they plan to finish the property, but sometimes things don’t go as planned, and it can take longer. 

Also, ensure to ask if there will be penalties or extra costs if the property is delayed. If there are delays, it might affect your investment plans and cause financial problems.

8. Exit Strategy

Think about your exit strategy, which means how you will get your money back after the property is completed. Do you plan on renting out the property once it is completed? Or do you want to sell it?  

Knowing this will help you make smart decisions about where to invest and what property to choose. Having an exit strategy will guide you, so you don’t make decisions that could hurt your investment.

Different Risks Involved in Investing in Off-Plan Properties

While investing in off-plan properties can be a smart move, it comes with risks that you should be aware of before jumping in. It’s important to do your homework and understand the potential challenges so you can make better decisions.

1. Construction Delays

One of the biggest risks of investing in off-plan properties is construction delays. Sometimes, projects take longer than expected due to things like lack of workers or waiting for government approvals. This means you might have to wait longer than planned to see your property completed.

2. Developer Financial Trouble

Another risk is that the developer might run into financial trouble during the construction period. If the developer runs out of money, the project might stop before it’s finished. 

In such cases, you might lose the money you’ve paid, and getting it back could take a long time, especially if you have to go to court.

3. Market changes

This is also something to keep in mind. While your property is being built, its value might go up or down. If the market drops, the property might not be worth as much when it’s done as you expected.

4. Quality Concerns

Since you’re buying a property that’s not finished yet, there’s no guarantee it will turn out exactly how you imagined.

To avoid disappointment, it’s a good idea to research the developer’s past projects to see if they’ve delivered high-quality properties before.

Being aware of these risks will help you make an informed choice when considering an off-plan property investment.  

Benefits of Investing in Off-Plan Properties

There are many benefits that can come with investing in off-plan properties. Some o the key benefits includes:

1. Lower Price

Buying a property before it’s built usually costs less than buying one that’s already done. This means when the building is finished, it might be worth more than what you paid.  

2. Property Value Goes Up

Off-plan properties often increase in value even before they’re finished. This can give you a good profit if you decide to sell later.  

3. High Demand for Rentals

If your property is in a great location, lots of people might want to rent it once it’s finished. New buildings are often very popular for renting, so you could earn good money from rent.  

4. Customize Your Home

When you buy off-plan, you can make some decisions about how your property will look. For example, you might get to pick the layout or the type of flooring and finishes you like.  

5. Flexible Payments

There are usually different ways to pay for off-plan properties. This gives you the chance to pick a plan that works best for your budget.  

Conclusion

Buying a property before it’s built can be a good opportunity for anyone, whether you’re new to real estate or have done it before.

You might get the property at a lower price and even choose how some parts of it will look.  

But, like any investment, there are risks. To avoid problems, you need to learn all you can about the deal, understand the rules and contracts, and make sure you know what to expect.  

FAQs

1.How Long Does It Take to Finish an Off-Plan Property?

An off-plan property usually takes 1 to 3 years to be completed. However, this can change depending on the size of the project, how complicated it is, or any local rules. Sometimes, delays happen, so it’s good to be ready for that.

2. Can Non-Residents Buy Off-Plan Properties in Nigeria?

Yes, people who don’t live in Nigeria can buy off-plan properties. They just need to follow the country’s rules and get advice from experts to make sure everything is done correctly.

3. Can You Get a Mortgage for an Off-Plan Property?

Yes, you can get a mortgage for an off-plan property. To be approved, you’ll need to meet certain requirements, and the amount you can borrow will depend mainly on your income and expenses.