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Capital growth on established vs off the plan

7 July, 2016 / Category: Investment

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Why we prefer established properties over off-the-plan

There are 2 schools of thought when it comes to property investing and they generally lean to either established property or off the plan. Whilst I can understand the benefits many see in an off the plan purchase it’s not the method of investment we ailing with at Infolio.

Essentially an off the plan investment will mean you secure a property at a lower price with minimal stamp duty to be paid. You accept a property based on architect plans and digital images. These types of properties are purchased at a price that often means that by the time you seek to lease it out you will often be neutrally geared or in fact cash flow positive. The issue I see with this type of property is that they rarely meet with expectations, they are small, they are in large developments, can be built cheaply and are one of many exactly the same – they have no X factor. So whilst you may make some money during the time you hold this type of property as an investment the real issue will come to light when it’s time to sell. Often this type of produce is in abundance and can be worth less than what you initially paid because you will likely be competing with others for sale in the building or newer similar developments.

The Infolio investment model is based purely on capital growth, what we look for is a property located in an area that has proven historical growth patterns and a building that has been sold and resold many times before so again we can use past data to predict future performance. Capital growth property is often expensive to secure and will cost you each week to hold, but over time your capital investment should grow steadily and consistently. When investing using this method you should be able to use the capital gains to secure another property without the requirement of saving for another deposit as you can re-finance the initial investment property.

My strong view is that if you are investing in property for cash flow you have chosen the wrong investment, if you want to make money from property long term and can save and be diligent, then property is the way to go as the gains over time are superseded by very few other investments options.

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