Introduction
One could easily understand the rationale behind viewing Nigeria, and Lagos in particular, as a location that simply oozes opportunities. The lavish and indulgent lifestyle experienced by the elite is indicative of what one stands to gain if those said opportunities are properly leveraged. Regarding the investment landscape, the volatile nature associated with sectors such as oil and gas or the equally intricate banking systems and their seemingly unfavorable rates could pose a more risky path to follow. However, there lies a significant investment opportunity amidst the rest; namely- Off-Plan Properties. When seeking to invest in property, it is imperative to consider a couple of key attributes which are a) high returns and b) capital growth, both of which are a staple associated with off-plan properties.
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What are Off-Plan Properties?
Off-plan properties are exactly as described on the tin as they refer to the purchase of a property before the completion or commencement of the project as there’s little or nothing concrete which can be viewed, ergo… “off-plan”. This mode of purchasing properties has been increasingly adopted for a variety of reasons, including the growing demand for housing and also to combat the housing shortage. However, this article aims to shed light on off-plan properties being viewed primarily through the lens of an investment vehicle.
Benefits of Off-Plan Properties
Discounted Purchase Price: It is paramount to first highlight the most glaring benefit that lures prospects and that is the ability to purchase the property at a markedly lower price point than the market usually dictates in contrast to fully completed properties. Oftentimes, developers are keen to demonstrate a significant level of sales and demand before marketing the development, which in turn affords prospective buyers the luxury of purchasing properties below market value, as well as additional discounts for buyers seeking to buy multiple properties.
Potential for Higher Return on Investment: The potential for higher returns on investments (ROI) has also proven to be significantly lucrative as these developments are often built in areas that are highly sought after and as a result, increase the potential for capital appreciation. Investors will therefore be afforded different options that could be explored depending on their investment strategy and situation. They could decide to adopt a short-term approach which would involve selling the property at a profit before and upon completion or a longer-term course of action involving tenanting the property to benefit from recurring rental income, as well as capital appreciation.
Incremental Payments: The specific terms and agreements of this are likely to vary amongst developers, however, buyers are frequently awarded the added benefit of spreading the cost of the property over a set period, thus avoiding a one-off, lump sum deposit. This degree of flexibility will likely free up funds for buyers to use elsewhere and simply enhance the level of appeal involved with the process.
Risks of Off-Plan Properties
The prospect of off-plan properties is generally littered with an array of potential benefits for individuals willing to invest in such projects; they are not, however, exempt from potential risks.
Delays: As one might expect when dealing with construction projects, delays are inevitable as a result of a myriad of factors. Gaining the requisite permits, inflation, economic recession, a shortage of materials or labour, poor weather, etc represent a few typical sources of these delays and ultimately might prove very costly for those investors who anticipated a quick turnaround of profit.
Issues with Developers: It is extremely vital to ensure the developers can be trusted and ideally have a catalog projects with a notable reputation for delivering outstanding properties. This in turn will likely mitigate any potential issues which could be encountered whilst working with certain developers.
Conclusion
Delay, as they say, is not denial and the aforementioned points highlight off-plan properties as a significant investment opportunity that could be leveraged to yield high returns. There are several considerations one must take into account when weighing up whether or not to invest in off-plan properties and precisely what they aim to achieve through their investments before making informed decisions. Ultimately, as off-plan properties continue to grow in popularity and margins of profitability, it is safe to say it has indeed established itself as a noteworthy investment vehicle.
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