Careful research, due diligence and professional advice
With any potential investment you make it is extremely important to carry out a process of comprehensive research to make sure that the decision you reach with regard to your investment is well thought out and informed to help you maximise your potential returns. The Overseas Property Advice Centre (OPAC) has been established to allow clients to make well informed, educated decisions about which international property investment options are right for them.
Every client that OPAC deals with will be guided with our expert, professional advice obtained from many years experience within both the property and investment world to ensure that the investment opportunity recommended suits our clients needs from both an investment strategy and risk/reward basis.
Before recommending any off plan investment opportunity OPAC will undertake a strict due diligence process to ensure that both the developer and the proposed project meet our stringent guidelines.
The due diligence breaks down into two main segments, firstly the developer or constructor of the project and secondly the actual property/resort that they are planning on constructing.
Due Diligence on the Developer
Sadly in the past there have been cases of unscrupulous developers that have taken reservation fees and deposits for projects that have no planning permissions and in some cases where the developer does even have legal title to the land they are claiming they will be developing the properties on.
Thankfully just as with a property purchase in the UK these pitfalls are easily avoided by taking professional advice, from OPAC and utilising the services of an independent lawyer before signing any private purchase contracts.
OPAC will meet face to face with every developer/promoter that we wish to work with and insist on complete clarification of the planning stage of the proposed development and that the developer actually owns clear title to the construction site.
We will also discuss with each developer other projects they have undertaken in the past as clearly this is an extremely good guide to the quality of their work.
Contracts for purchase will be requested by OPAC to ensure that
- They are translated into English for the clients own perusal where required.
- The contract will allow for the purchase option to be reassigned prior to completion to allow those investors who are buying to “flip” the ability to sell on before having to complete.
- If the contract does allow the option to be reassigned then does the developer or promoter make a charge for this and if so is the charge clear and specified in the contract. This is vitally important as we have seen clients who have come to us for help and advice who have purchased off plan and when they have found a buyer to sell onto before completion the developer has tried to charge them up to 10% of the sale price as administration fees for re-issuing the contract in the new buyers name. Sadly there is nothing you can do if it is not clearly stated in the contract and suddenly the clients great investment is not looking so profitable as it was.
- The payment terms quoted by the developer are the same as the contract and that the necessary VAY where applicable will be fully paid by the developer to the appropriate authorities upon completion of the property or earlier if legally required.
- Any development funding that is secured upon the land or the buildings will be fully redeemed on the day of completion so that clear and legal title can be passed to the new owner.
OPAC will request confirmation that Bank Guarantees are in place and are issued by reputable companies with a sound financial footing. A Bank Guarantee ensures that the investor is fully protected in the event that the developer runs out of money or folds before completion of the project and means that the insuring Bank or Financial Institution will returns all funds paid and often with interest to the investor.
Is is important that investors realise that in many of the emerging markets around the world such as Bulgaria, Morocco and Brazil the system of Bank Guarantees does not exist. OPAC believes that these markets offer extremely high potential for capital growth and as such we would not be performing our roles as property investment advisors if we did not offer these markets to our clients, so as a consequence with investment opportunities in these new markets we are even choosier than normal in making sure the products we offer are from developers with an excellent track record of building quality products and have a strong sound financial footing.
Due Diligence on the actual investment property opportunity.
All investments no matter in what field fall into a Risk/Reward category from Government Gilts and Building Society/Bank Deposits at the ultra low risk but very low reward category through to Financial Futures/Options and share holdings in individual companies at the high risk high reward category.
Off plan investment property is no different and that is why OPAC makes sure that every investment opportunity we recommend is fully understood by the client at all stages and that it matches their own individual investment aims and ambitions. This allows the client to feel at ease with the decision they have taken and plan ahead to ensure that necessary funds are in place when required and there are no hidden surprises at any stage of the process.
It is within the emerging markets of the world that some of the highest reward opportunities exist and we believe it is important that our clients understand some of the factors that have combined to make the investments attractive and that are driving the property market in that location as a whole.
Factors that drive property markets are many and varied but can be broken down into five main distinct areas.
1) Location, location, location.
It’s a very old saying in the property world and it has never been truer than today. Location is the main driving force driving the value of your investment both from a capital growth perspective and a rental income viewpoint. Location matters for the overall development and obviously also the actual property within the development.
If your development is situated in an unpopular or rundown area or is in an area not targeted for infrastructure investment then it will always be cheap, quality always sells first. If within the development you buy a property that has views of another block or looks over a road whereas others within the resort are golf course or beach facing then the units with the better views will always command a premium at completion and beyond. The same applies with orientation, in the northern hemisphere most holiday home owners from Northern Europe, Scandinavia and Asia want south facing properties to benefit from the warm sun, if you buy a golf property in Spain with a north facing orientation then you might sell onto a Spaniard who is sick of the sun but probably not to someone from the UK. Your exit strategy must ensure that the property you have invested in appeals to as many people as possible when you come to sell on.
2) Purchase Price/Perceived Value
As with any investment the key to maximising your profit, is to buy at the right price i.e. as low to the bottom of the market as possible. When developers release new developments they often increase the purchase price of the properties as the sales take off so it makes sense to get in as early as possible to ensure your gain is highest. OPAC liase close with property developers around the world to make sure that our clients are the very first to find out about exciting new opportunities and this is why it makes sense to sign up FREE for our OPAC investor updates which will be delivered directly to your email inbox.
3) Investment in infrastructure.
One of the most obvious signs of a property hotspot is when it is apparent that monies are being invested in local infrastructure. New roads, train links, airports are great guidance that the local government is committed to improving an area. New tourist attractions and facilities are also good indicators that companies believe an area is about to improve rapidly hence their own investment.
4) Political and Financial Stability
Sadly in todays world where terrorist atrocities seems a permanent fixture, the political, religious and security stability of a country is all important when considering the possibility of an investment in property. Countries that are stable and deemed safe from terror are in demand and so are vital drivers of an emerging property market.
5) Tourism and Natural Factors
With the ever increasing availability of low cost air travel, destinations that were once unpopular for holiday home ownership are suddenly looking very attractive. The advent of the web combined with these great value flights has made the world a smaller place in effect and places that were difficult to research or hard to travel to are now realising that when combined with their inherent natural beauty there is an ever increasing demand from tourists for both holiday rental accommodation and holiday home ownership as the traditional package holiday loses market share and general popularity. Tourists are becoming more adventurous and more discerning in their choice of destination and they want to experience new and exciting places rather than some of the more traditional holiday locations.
Before making any recommendation to a client OPAC will ensure that each off plan investment opportunity fulfils our strict criteria and passes our due diligence. Our expert team of property researchers are in daily contact with developers and promoters around the world to continually bring OPAC clients exciting, rewarding and genuine property investments.