Should You Invest in a Property That Hasn’t Started Construction On-Site?

Posted by Salboy Ltd on 24th November 2022 -

As investing in off-plan properties is becoming increasingly popular, it’s crucial you know what to be aware of with these types of property investments. In this guide, we’ll cover what makes certain developments lower or higher risk and help you make more informed decisions on an off-plan purchase.

So, for starters, should you invest in a property that has not started construction on-site? In short, probably not! Here’s a checklist of questions property investors should go through and ensure they know the answers to before considering purchasing an off-plan property. 

• Have they started on-site?
• Do they have planning in place?
• What is the track record of the developer?
• Do they have a quality contractor in place?
• Are they forward funded?
• Do they have construction updates available?
• Can you see press coverage about the developer? 
• Are they experienced in the off-plan field? 
• Can they provide evidence of completed sites and are they finished to a high quality? 

Answering these questions will help you better understand the risks involved with purchasing a specific off-plan property. Now, we’ll dive into the importance of looking into these areas and how they impact investments.

Why do developers start selling units before starting construction?

Sometimes developers need to sell a certain number of properties before they can start on-site. This is typically when a developer relies on deposits to fund the construction of the development.

These kinds of developments are often highly incentivised, and in many cases, a large proportion of units need to be sold. In extreme cases, sites can require up to 75% of the units to be sold before they can start on-site. 

This can naturally lead to delays, and if they don’t sell enough units, it could even cause the development to not be built out at all. These types of developments come with a higher risk when purchasing off-plan property.

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