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How long will it be before I can expect to see a return on my investment?There is no specific answer to this question as there are many variables that can affect time frames, together with the specific off plan investment strategy that best suits your requirements. All of these variables and strategies are discussed in great detail within our guide. If you read on, our guide will confirm that one of the greatest attractions of this form of investment is the flexibility it can offer, however it should be pointed out that the maximum returns will be made if you have a long term commitment, usually in around five or six years and it will be difficult to realise your profit prior to the completion of your property. The build period will obviously affect the time frame of potential price increases and project build time will vary from development to development. The first phase of construction might be completed within one or two years, but dependant on the scale of the project, it could be two or three years more before the bulk of the construction is finished. Commercial properties and other facilities for residents will also then be fully operational. Furthermore the park areas, gardens and green zones will need to establish in order to realise the architects vision as well as achieving maximum desirability, resale potential and profit. The largest price increases historically within this type of development in Spain occur during the build period and also during the first three years after project completion. Another option available of course, is to re mortgage a year or two after delivery, releasing your original capital with some profit. This could probably result in a negative investment level for you and with no capital gain liability whatsoever. There will be some charges for arranging the mortgage however. Whilst early price increases, or buying pre licence, as explained below can produce significant early paper profits, possibly within the first few weeks in some cases, we should point out that it may be difficult to realise this profit and release it for other purposes at this stage. In the past selling before completion, or “turning" or "Flipping” as it is commonly known, was possible, however this practise is currently very difficult as legislation was initiated to curb it. It is possible to sell on your investment at an early stage should you really have to, but usually you will have to give up your gain to entice a new buyer. You may also have to wait until completion to receive payment. Please read the section entitled “what happens if I want to redeem my investment early on” for more detailed information. Buying Pre Off Plan or without final license Pre off plan sales are units that are sold prior to the signing off of the final building license and at this stage the developer can also monitor the market response to enable him to revise the purchase price or specifications, whilst securing some advance sales to give the project some forward momentum. Prices are fixed for the purchaser and a specific unit can usually be selected, often in a prime position. On the other hand the only risk is that the promoter fails to receive final approval, which would result in a refund of your small initial payment. The advance payment is minimal, normally by way of a reservation, or option to purchase fee that is be paid to the developer, usually in the region of 3000 Euros. The contract states that this will be refunded if the developer fails to obtain the final building licence, sometimes with interest. Once the final permissions have been agreed and the building license issued the developer will launch the project and probably raise the prices significantly. Contracts will now be issued, normally in four to six weeks, at
this stage the first deposit payment is due, minus the reservation
paid. The payment schedule is agreed at the time of reservation. IPS 2007 Index Page - IPS Guide Index page Page 5
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