Spanish Off Plan Investments in the Costa Del Sol

For some time now, the Costa del Sol has attracted shrewd investors keen to benefit from the outstanding financial returns available from investing in "Off-plan" property.

It is not unusual to see returns in excess of 100% on Capital employed over a two year period, which by any standards is a phenomenal achievement.

There are a combination of factors which lead to this level of opportunity, and it is only by fully understanding the contributory factors to the most successful investments that you can expect to achieve the highest returns.

The Basic Principles of Off Plan Investments

When a developer establishes a new site, properties are made available at a price which is considerably below that of established, comparable properties in the same area. The reason for this is quite simple - the developer is keen to generate cash flow!!

A small reservation deposit secures your right to enter into a "Private Contract" with the developer. At this time, you would expect to engage the services of a Spanish Lawyer to ensure that all the necessary searches and permissions are in order. At the time of entering into such a "Private Contract" with the developer, an investor is only required to put up a percentage of the actual offered price of purchase. Typically, this is around 30% - in some cases, even lower.

During the course of construction, which normally takes around two years, the prices will be increased as the developer reaches certain milestones pre-agreed with his own financiers. Additionally, there will be further increases as the general property market grows year on year.

Your off plan investment is protected by Bank guarantees in the unlikely event that the project does not reach fruition.

A Real Life Example

An Off-Plan property is purchased in May 2002 at an agreed price of €192,000.

The investor has to pay 30% at the time of Private Contract, which is €57,600 plus IVA (VAT) of 7% - totalling €61,632

In April 2004 the investor sells to another party who agrees to purchase the property (in actual fact, the Private Contract) for €304,000

The buyer refunds the original investment of €61,632 plus the difference between the purchase price and the selling price - in this case, €112,000.

The cost of sale and legal fees totalled €18,000

Net profit = €96,000

In just under two years, the investor has seen a return of 156% on the capital employed.

Free Spanish Off-Plan Investments Guide

We have prepared an extensive guide detailing all of the factors to be taken into consideration when selecting the best Off Plan opportunities. If you would like a free copy of this document, please email us at:-

investments@costadreamhomes.com