Why I’m not so fond of ‘off-the-plan’ projects

A couple of days ago, I saw this news on TV3’s Buletin 1.30 about an abandoned property development project somewhere in Petaling Jaya.

Property development projects being abandoned. One of the reasons why I’m not really into off-the-plan projects. Another reason is that my hard-earned money is not put to work until the project is actually completed.

Yes, there are money to be made from off-the-plan housing developments. However, from the “enjoying the rental income” perspective, I don’t see this materialising quick enough. You might say, come on Nadlique, patience is key. Yes, that is true, but why would I invest my money somewhere where I can’t enjoy the rewards now, when I can invest that same amount of money someplace else, with a comparable amount of risk, and enjoy the benefits immediately?

In the news, some of the buyers complained that they are burdened by the rental payments they need to pay for the houses they are staying in now, and also the loan repayments to the bank. So, I’m assuming, quite a lot of money have already been paid up front! That means, for property investors, you start paying the bank a long time before you can enjoy the rental income. That would be fine if you have deep pockets, but I think, if it was me, my money is best invested elsewhere.

Some say, come on, you only need to put down 10% down payment, and release the rest progressively. But think about it, that 10% is not going to work for you until the project is actually completed (which might take years!). If you had purchased houses that are already on the market on the other hand, you can, technically, enjoy rental income and capital appreciation immediately.

Then, as I have said before in my previous article, the area being developed might not have a track record, unlike properties who have been up for years. So, it’s going to be a tad harder to estimate the expected rental income, capital appreciation, accessibility, and etc.

If you still insist on off-the-plan projects, then the rule of thumb is to make sure you are dealing with a reputable developer. How much experience do they have and how they have fared in their past projects. Say, you are buying an off-the-plan condominium project from a newbie developer who only had experience in building walls and fences. All alarms should start ringing. This is not to say that they are incompetent, just that you need to exercise caution.

All in all, off-the-plan projects for the purpose of “enjoying rental income” strategy, not really my cup of tea.

Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

On a lighter note, let’s enjoy a song by Celine Dion entitled Taking Chances 🙂


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