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Property Majorca bying off-plan


Property Majorca bying off-plan
Buying off-plan as an investment
Some clients does not have to get access to their property straight away and there are some advantages of buying something under construction, please do not hesitate to consult us for more information.
English, German and Spanish developers very often offer clients the possibility to buy properties on a new development before and during the construction phase on Mallorca. By doing so they improve their cash flow and reduce their risk. It is called buying off plan and presents an excellent investment opportunity.
The demand on properties on Mallorca has increased steadily over the years. Mallorca is for many UK and other international residents the number one choice for having a “second home” either for private use and/or as an investment. Due to restrictions on new developments on the Mallorcan Island you will find a limited exclusive number of developments left. The ones on the market now are a mix of fabulous front line developments with exceptional sea view to prestigious golfing developments.
What are the advantages of off–plan buying?
1. Price
The main advantage is the price. If you buy early in the development phase you have the advantaged of choosing the best position in the development to a lower price than in later stages. Many developers sell to a lower price in the early development stages to increase cash flow and finance their project. Another advantage is the normal increased value of the property. We know from experience that prices rise with 10-20% per year. Since you buy the property in its early development stage, below its true market value, you can make significant profits in a short term view. The mortgage rate in Spain is today highly competitive with other European countries. It offers you an excellent investment potential in a still rising market. The initial capital investment is low. You can make good earnings on rentals in a medium to long term span.
2. Better standard and personalization
If you invest in a property under construction you will acquire a property according to latest building standard and materials. A lot of constructors do also allow their customers to personalize in terms of choice of colors etc, depending on where they are in the construction phase.
What is the initial investment buying off plan?
If you decide to go ahead you normally make a deposit on 1% of the value and the property will be taken off the market for 14 days -28 days. During this time you will have time to arrange with mortgages and paper work. The remainder of the price is due upon completion.
Financing

When you buy a property under construction there is very often a payment scheme to follow. The last payment is proportionally the largest one and is very often up to 70% of the total investment. This can be a financial advantage for some clients.


Guarantees

When you buy a property from a developer you normally get a year’s guarantee of minor damages and faults. Apart from this there is also, by Spanish law, a 10 year guarantee of major construction faults.

All your payments to the developer are also guaranteed by a bank guarantee. Should something unexpected happen (e.g. the construction is not finished or it’s very delayed) you are guaranteed your money back plus interest by law.