Make Money On Property Purchase By Stage Payments
Keywords: Real Estate, Property, Investing, Off Plan, Stage Payments
Buying a property which is not yet constructed is a popular option in many real estate locations including the USA, Caribbean, the Middle and Far East, and the EU. Terminology may vary from one location to another and include a Pre-construction Project, Off-Plan Purchase or a Stage Payments Purchase.
The basis of the deal is that the property developer, for a variety of legitimate reasons, does not wish to construct properties on a speculative basis and then attempt to find buyers for them. One reason may be inadequate local finance facilities, or alternatively, he may not wish to take the challenge of marketing completed properties.
This situation poses significant opportunities for the shrewd investor or property buyer. If the buyer has researched the market, he can make serious returns on his investment without taking ownership of the completed property.
The spread of stage payments over the life of a construction project varies tremendously, but is often in the form of a deposit of 15%, followed by further payments of say 25%, 27%, 25% and 8% when the property is completed. The minimum time period is unlikely to be less than 11 months, and it can be considerably in excess of that.
Once the buyer has made a deposit, then the developer is contracted to build the property. At any time during the construction process, the buyer can exercise his right to sell the contract to another person.
For example, Mr Smith contracts to purchase a property at $200,000 and pays a deposit of $30,000. The developer has not started work on the site, and the expected completion date is 2 years. After 6 months, construction work has started and Mr Smith makes a further payment of $50,000. Prior to the next payment falling due, Mr Smith sells the property for $240,000. He has taken advantage of the rising market and made a profit of $40,000. However, this profit has been made on an outlay to date of $30,000 plus $50,000, namely $80,000. This is an impressive 50% return.
However, all good deals can turn sour. There are several points which a prospective investor should bear in mind.
1. It is always best to be an early bird buyer as prices of new properties tend to rise as activity begins on the site. Once the prices have risen, the opportunity has passed.
2. In some locations, there are lots of completed properties which developers and investors are seeking to offload at significant discounts. New builds will only make matters worse. Spain and Dubai are current examples.
3. The buyer must have the right to sell prior to completion. This may seem an obvious point but many contracts issued by developers give them the right to refuse such a transfer unless they approve of the purchaser. From a developers viewpoint, this simply safeguards the developer against bad credit risks. However, from a buyers perspective this may lock him into the contract until completion.
4. As in all business deals, one should ponder on what might go wrong. In this setting, it is always possible that prices may fall rather than rise and an investor may have difficulty in finding a buyer during the course of construction. This means that an investor needs to feel confident that he can finance the full price of $200,000 if need be. An investor who only has access to say, $100,000 of funds would be ill advised to contract to purchase a $200,000 property.
5. When things go wrong they can go really wrong. An investor should examine the purchase contract carefully in order to understand fully what happens if he is late in making a stage payment. The contract will normally stipulate that a stage payment falls due when the developer has finished a specific task, for example, he has tiled the roof. The contract will give the buyer a limited period of time to make the appropriate stage payment. After this time, a penalty will be incurred.
6. Some contracts fail to spell out in simple English what will happen if the buyer simply cannot make the payment at all. Many developers offer verbal assurances that the buyer will have a refund of monies paid to date, but this is often far from the truth. Some contracts state that if a buyer fails to make a stage payment within say 60 days, then the developer may declare the contract void. What this invariably means is that the developer will sell the project to someone else at the full price and pocket all the monies paid to date by the unfortunate investor.
So, the investor must be aware of the risks of a Stage Payment deal, and be prepared, if need be, to hold onto the contract until the property is completed. If the investor selects a property with a rental potential, he could then make a decent return on any funds he has borrowed to complete the purchase, and have the flexibility to await a market upturn before he cashes in his investment.
Leslie Hardy is the UK Chairman of Wellington Estates Ltd, a North Cyprus property development company. Read more on this topic at www.wellestates.com
Previous Articles Highlighter:
Can Your Family Live On A Single Income? (1)
And with practice the sacrifices you make may not seem so bad. You will probably take fewer vacations, and they'll be simpler. You will probably eat out less often.
A House To Secure The Future (2)
If you find that you can afford that country house sooner rather than later, but are unwilling to sell the old apartment, you could go in for a secured loan.
Financial Shelter, Status, And Earnings (3)
A buy to let mortgage does simplify the life of the landlord who intends to rent out his house. However, this kind of a loan has its own set of negatives.
Cherie Blair, The Orams Case, And Cyprus Property (4)
Ms Booth reminded the court that when the republic of Cyprus joined the EU, it signed and accepted Article 1 Protocol 10, which states - We (the Greek Republic of Cyprus) have no effective control over the North - Considering Article 1 and the fact that the case is still at appeal stage, the UK and other EU states cannot interfere in the affairs of Northern Cyprus, she said.
Potential House Buyers Forced To 'Lower Their Sights' (5)
Overall, the average home was now reported to cost 181,039 pounds - a rise of 9.1 per cent from the same period in 2006. London was reported to have driven growth during the course of the month, as homes in the capital rose by 1.5 per cent to a typical value of 338,950 pounds.
North Cyprus Property - Is It Safe To Buy ? (6)
These are, firstly, internationally recognised pre 1974 title deeds issued to Turks, Britons etc. These title deeds are recognised by the Greek Republic of Cyprus and are therefore considered absolutely safe.
Brits 'Willing To Carry On Borrowing' (7)
Meanwhile, consumers were urged to check the total amount repayable rather than the annual percentage rate (APR) when comparing deals as APRs are said to be possible victims of manipulation.
Too Much Income Can Be Hazardous To Your Financial Health (8)
You can find many mutual funds that invest in high quality, dividend growing stocks. Start by looking at Big Cap Value funds. Many such funds have the word income or dividend in their name.
'Stall' Noted In House Price Rises (9)
Meanwhile, a substantial number of homeowners will see their mortgage bills rise markedly during the second half of the year as the cheap fixed-rates that they took out two years ago expire".
How To Choose The Best New Hardware To Upgrade Your Computer (10)
You can be basic with the extra hardware you get for your computer. There are different chips with massive amounts of storage or chips that can accelerate the speed.
The Difference Between Pre-Settlement And Post-Settlement Funding (11)
PPiCash and ProsperityPartners offer accurate and useful information about lawsuit advances, structured settlements and annuity cash out. Learn more about these financial options from expert sources. Visit us at www.prosperitypartners.com
What Is The Present Value Of Future Money? (12)
This makes insurance companies extremely profitable in a settlement case. As you see whoever takes advantage of the present value of future payments first (whether it is you or insurance companies) get the full benefits of a precious investment.
Taxes And The Home Business (13)
That means you will need to pay both the employer and employee percentage of the taxes. You can, however, choose to simply invest in an IRA Plan. If you had a 401K or an IRA when you were working, you can take the money and roll it over so that you do not have to pay taxes on the distribution.
Getting Into The Real Estate Business (14)
First off, you can buy a piece of real estate, fix it up and then resell it for a profit. This is a great way to make money if you know how to manage what you are doing.
How To Fund Your Business (15)
There is always a way to find some money to serve as start up capital for your business. Going To The Bank The best source for capital for your business is the bank.
Home Business Expenses (16)
For instances, if you have money set aside to pay for your supplies, that money should never be used to pay for the amortization. Once you start mixing up your funds and using them for different purposes other than what they were originally intended, you may not be able to replenish it fast enough to beat the billing period.
How To Obtain A Business Loan (17)
Put your solutions into writing and then calculate how much you will be able to earn if these risks have been minimized. Since the bank will mostly require you to present a business plan that will cover a few years of business operations, you need to spread the risk over the timeline indicated in the business plan.
How To Save For Retirement (18)
Be sure that you do this so you know for certain what kind of things you can do with your retirement funds and to make sure that you are not going to lose them at all.
Independent Living Post-Retirement (19)
They no longer need to feel dependent on their family and friends for their daily needs. The ability to hold on to one's self-esteem after retiring is a great boon.
Debt Consolidation Financing - Pros & Cons Of Secured And Unsecured Loans (20)
Even in an active and robust seller's market lenders have many more important actions and projects to do and don not want to undertake the effort of removing a homeowner and selling a house.
Newer Articles Highlighter:
How To Use Mortgage Refinance To Help With Your Debt Consolidation Solution (1)
One drawback is what was just alluded to in the opening paragraph, it is a big step, refinancing your current mortgage loan involves most of the steps required to take out the loan in the first place.
Different Kinds OF Hedge Fund Strategies (2)
Global Macro - Investing in shifts between global economies, often using derivatives to speculate on interest-rate or currency moves. Market neutral: Typically, equal amounts of capital are invested long and short in the market, attempting to neutralize risk by purchasing undervalued securities and taking short positions in overvalued securities.
Some Pros And Cons Of Owning Real Estate (3)
There are many tax benefits you can gain from owning a home. You can deduct most repairs, mortgage interests, and taxes. Talk with your accountant about these options, and save all your receipts from anything having to do with your home.
Get Draped In Insurance Plans (4)
At least you will not have to continue to wonder about how you will cope if such a thing does happen. You have insured your house after all. Medical insurance is yet another insurance type.
Your Finance Options For Home Renovations (5)
2) Credit cards: This is a very convenient way of arranging for finance but the disadvantage is that it carries a very high rate of interest. 3) Refinancing: You can refinance the mortgage of your home to get finance for the home renovation work if you have sufficient equity.
Emerging Hedge Fund Manager Sentiment Survey Declares Technology As Best Investment (6)
Also, according to Dr. Susan M. Mangiero, CFA, Accredited Valuation Analyst and certified Financial Risk Manager, "Pension fiduciaries are on the hook for making sure that they have done everything possible to avoid a hedge fund meltdown.
Preparing For Vehicular Breakdowns (7)
Moreover, women in general are reputed to being safer as drivers than men. Quite a number of ladies have been applying for women-specific car insurance plans. In some countries such as the United Kingdom, it is mandatory to have car insurance before you take your new car on the highway.
Purchase Order Funding Provides Instant Cash From Invoices And Contracts (8)
Early stage, mature and start up companies use PO funding. In each case, the company has successfully marketed its goods or services, and has a bona fide sale lined up with the buyer.
The Hedge Fund Manager Evaluation And Transparency (9)
It is important to ensure the proper risk controls and that procedures are in place. Hedge funds are not equal in the level of information they provide to investors, yet it is important to find out all you can.
Enticement For Unsuspecting Customers (10)
As a result, today's world is marked by a great deal of rivalry among product and service providers. How would they ensure that their sales revenues rise higher than those of their nearest competitors?
The Truth About Real Estate Financing (11)
Check with your CPA or accounting professional - you may be able to deduct the interest you pay on the mortgage loan and some of the financing costs of the home, like the points on your income tax return.
Comparison-Making In The New Millennium (12)
What about the house that you purchased some time ago? Didn't you look around for the ideal house that would look good, be spacious, have a great view, and be easily accessible?
Balance Transfer Credit Card Strategies (13)
The first is not to make any goods purchases or draw cash at all with the card after you've made the balance transfer. You must treat this card solely as a card for handling your transferred balance - you should literally not use it for anything else.
Creating Financial Stability For Healthcare Providers (14)
As for the predictions of future capital expenditures , the study compiled some interesting statistics: 72% of CFO's expect capital expenditures to increase in the next five years. 85% of hospital CFO's surveyed said they thought it would be more difficult for their organizations to fund capital expenditures in the future 63% responded that they expected to be more dependent on cash from operations to fund capital needs.
Money Transfer Overseas (15)
Keywords: iKobo coupon codes, ForexWebTrader discount codes, forexyard coupon code Most if not many immigrants send money to their relatives and friends in their home country. You can transfer money from overseas in several ways.
Do You Give Yourself Credit? (16)
Now I'm collecting my thoughts. Maybe I should have more credit cards. Knight Pierce Hirst takes humorous looks at life. Take a minute to make yourself smile at knightwatch.typepad.com
Factoring Medical Receivables Provides Cash Flow (17)
This fee helps the funding source defray costs of researching and analyzing the practice's billing methods and procedures and to verify that the net collectible billing is accurately reflected on the firm's books.
Leasing Gives Providers A Way To Acquire Medical Equipment (18)
The problem is getting worse If you're like most medical care providers, you are facing the dilemma of how to provide cutting-edge care to your patients but don't have the financial reserves (cash or credit) to make the purchase of new equipment.
Finding The Right Agent To Sell Your Home Fast (19)
If you are thinking of getting in contact with any real estate agent for selling your property, you should avoid walking into the office of the agent directly because letting a complete stranger sell your house is not a very good idea.
How Can Home Staging Services Help You To Sell Your Home Fast? (20)
Arrangement of furniture: Making slight changes in the arrangement of furniture can make a lot of difference to the look of a house. You can arrange furniture in small settings if the room is large.
Permalink to Make Money On Property Purchase By Stage Payments