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‘Ready’ or ‘Off-Plan – Which is better for investors?

Why Some Customers want ‘Off-Plan’ Property

We are frequently asked about ‘off-plan’ or ‘under-construction’ property with good payment plans. Developers promote such properties at high prices but with the attraction of payment plans spread over 2 to 3 years. Currently such properties are typically premium 1-bed units costing over AED 1 million (£180K); or larger even more expensive properties for future own use. Due to the payment plans over 2 to 3 years, the properties seem affordable and good value to investors.

Whilst there are some good off-plan projects being launched, buyers still  need to be careful.

 

Why we only recommend ‘Ready’ Properties at present

After the financial crisis of 2008, when many Dubai investors ‘lost out’  (particularly with ‘off-plan’ or ‘under construction’ properties), we have only been recommending ‘ready’ properties in developed areas. In our view this minimises risks of non-completion and provides rental income from day 1.

 

The Best of Both? – Investment in ‘Ready’ Properties with a ‘Payment Plan’!

We show below how an investment in ‘ready’ properties can be structured to make payments over 3 years to obtain all the benefits of ‘off-plan’ purchase – yet none of the risks. This is possible because we give investors the ability to buy multiple lower cost ‘ready’ properties (with 25% of property price paid via guaranteed rental income) plus the option to upgrade from Studios to 1-Beds at a later date. Thus their investment can grow securely in small incremental steps.

 

COMPARISON EXAMPLE – AED 1m (£180K) investment over 3 Years

Forecasts show that lower cost ‘ready’ properties (OPTION 2) will be financially better in the end than one premium ‘off-plan’ property (OPTION 1) for the same investment over the same period.

 

OPTION 1 – OFF-PLAN PURCHASE of AED 1 million

‘Off-plan’ 1-Bed in popular Marina/Burj Area at AED 1m (£180K) with 3 year payment plan via developers.

End result – “ONE” Premium 1-bed apartment (with risks of delay and non-completion)

 

OPTION2- READY PURCHASE – Similar amount of AED 1m (£180K) over 3 years via Openshore

The payments can be made in a similar manner over the 3 years. In the case of ready properties, rental income can also be used to pay towards the properties – so in the end your assets are worth more!

Pay Now –           AED 230K             Purchase low cost Studio

6- Months           AED 80K               Upgrade to 1-Bed

12 months           AED 250K             Purchase another low cost Studio

18 months           AED 90K               Upgrade to 1-Bed

24 months           AED 270K             Purchase another low cost Studio

30 months           AED 100K             Upgrade to 1-Bed

End result – “THREE” 1-Bed Apartments

The payments required for the above will be similar to purchase of the premium 1-Bed ‘off-plan’ property. However the net asset at the end of the 3 year period would be much larger (estimated to be 30%  to 50% larger) and also the risks much lower as at each stage you have ‘ready’ assets registered under your name at Dubai Land Department.

 

Advantages of Low Cost Ready Properties

-Rental Income: Rental income will pay for part of the properties (with off-plan – your money is doing nothing and is making the developer profit)

-No off-plan Risk: There is no risk of developer going bust (this has happened in the past and people have lost money due to non-completion or delay)

-Get Title Deeds: You get the title deeds after each purchase (with off-plan title deeds can only be registered after completion, full payment and handover)

-No Delay Risk: No risk of delays (delays mean that you do not start getting rent)

-Easy Exit:  You can resell any number at any time. It is Harder to re-sell ‘off-plan’ property or property still under construction.

-Flexibility: It is not ‘all or none’ – You can sell one property and keep others as you have multiple properties.

-Rental yields higher: Smaller lower cost properties provide higher rental yields (10%) compared with premium more expensive properties (6%).

-Options Open:  You can still acquire a ready own use larger property later by selling your smaller investment properties and still have money to spare.

 

The OPTION 2 investment in ‘Ready’ Properties with a ‘Payment Plan’ is made easier by 3 Unique Offers – only available from Openshore

 

1.Pay 75% of property price

With our ready Studio and 1-bed units, you can pay 75% of the property price and we can collect the rest from the rent.

 

2.Option to Upgrade from Studio to 1-Bed

As we manage 100s of identical Studio and 1-bed units, we can offer customers the option to pay the difference (plus sales/transfer fees) and upgrade from Studio to 1-Bed at any time – thereby increasing their investment in ‘ready’ property over time, in small increments.

 

3.Rental Guarantees

As we select the better properties and provide management, we can be confident about the rental yields and thus are able to offer rental guarantees for minimum of 2 years on each property.

 

One thought on “‘Ready’ or ‘Off-Plan – Which is better for investors?”

  1. I think this there are no general rules e.g. “never buy off plan”. You have to look at the merits of each project carefully. Property prices are now growing well and whilst there are risks, off-plan does offer the facility to make large gains with less of one’s own money. But you must know what you are doing when you buy off-plan.

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