Buying Off Plan - What does this really mean?

Quite simply it does mean buying from the drawing board or off plan. This is usually some time before building commences and therefore often two to three years before completion. This is therefore often more attractive to investors than someone looking to move in and live in straight away.

The main attraction to investors is threefold, first you buy at today's legally binding prices, which allowing for normal house price inflation in Spain of 20% per year already gives a substantial profit on the resale value of the property when complete.

Secondly, you may sell on this property again before it's finished which means there are tax savings to be made as you are not yet the registered owner on the Escritura as this is not registered until after the building is complete.

Thirdly, most builders will not start building until the project is 50% sold, thus covering their costs before they start. To make this happen off plan prices are usually offered at a discounted rate (below current market value) and for the remaining properties, prices are increased when building starts and again periodically until completion.

Most builders will offer attractive payment terms i.e. 30% over 2 years of the construction period, the remainder (or mortgage) on completion.

As you can see if the property is sold before completion then all the profit is made on the original payments often giving at least 50% return on investment.

An example property costing initially €100,000

Deposits and payments over 2 years.............................................€30,000
Resale Price after 18-24 months....................................................€140,000
Outlay (Investment)............................................................................€30,000
Profit......................................................................................................€40,000

After taxes (if any) and legal fees etc. 50-100% profit is achievable.

Divided by 2 years equals up to 50% per year.