Buy of European real estate at the construction stage: the arguments for and against

Aug. 18, 2016

Buy of European real estate at the construction stage: the arguments for and against

Since the purchase of property abroad is now accessible to the masses, the number of new homes, villas, apartments, apart-hotels or office buildings in Europe is growing. Properties in such popular destinations as France or Spain not only become a favorite vacation spot, but can generate a steady income from the leasing business.

One of the latest trends in the construction is the increase in demand and in the volume of construction of hotels, where investors can buy individual apartments or rooms. Accordingly, there is a possibility of buying a property under construction. This investment strategy has its pros and cons, which will be discussed in this article.

Advantages of buying unfinished object

It should be noted that this method of buying property is extremely popular among foreign investors. The main reason is the low purchase price. Buyers who buy property on the early stages of construction, get a substantial discount from developers. In addition, you need to consider that due to market fluctuations in real estate market after finishing the construction the object can be priced 10% more expensive than the original market value.


Secondly, investors have the opportunity to choose the object of a large number of options. For example, most of the villas on the waterfront with views of the sea are sold even before construction has begun.


Another important advantage of this method of purchase involves high yield and short-term return on investment. In Europe, some developers guarantee to investors at least 5% per annum since the opening of the resort hotel. But if the investor wishes to get rid of the property, the developer will sell the apartments on their behalf after 5 years.

Cons

Buying of unfinished object is a risky strategy. In the adverse scenario, it is unlikely that developer will lose his money, but the investor can lose them more likely. But often the benefits far outweighed the risks. It is therefore vital for the investor to work with the developer who already has a "track record" of finished, real buildings.


One caveat – buyers selecting an object will have to focus only on plans, documents, pamphlets, since the apartment itself is not yet built. Some customers in the choice of housing want to see it with their own eyes. One way is to find a developer who has already built a similar hotel or house. So you will be able to see the quality of the similar property.


Finally, developers often make adjustments to their plans. For example, they may slightly change the location of the kitchen in the apartment. But there are certain limits of how the end result may differ from the original agreements with the investor. A good developer will promptly inform you about all the adjustments.

Conclusions

Thus, the purchase of unfinished building in Europe is a risky transaction, but your reward for the risk will be a significant benefit. With the right approach and stock recommendations from experts in the field, the buyer of such property will enjoy the fruits of his long-term investment.

Text – Alena Eliseeva, ee24

Photocredit Depositphotos.com