Off Plan Investing Profit Comparisons

We recently compared two great projects - both would re-sell well - both are in high demand areas - both meet all the criteria for investment, However, the ROI for each project is very different.

Project #1 Block of 6 Apartment's offered to investors at a discounted price

Total covered area of 80 m2 for each apartment 480 m2 in total the going retail price is £1,500 m2 The discounted investors price £1,134 m2 (£964 m2) There for the profit per m2 is £301 a 31% profit against purchase price.

Project #2 Block of 6 Apartments offered as an off plan investment, exactly the same as above except the payment terms

Both projects are laid out on a spread sheet format to easily see the profit difference

You will see in the example below the difference on the capital invested. The two comparisons are from two different developers in September 2006

Both properties are identical in the covered area and in price. The big difference is the percentage of deposit 20% or 30% and the stage payments with developers -A- but none with developer -B-

Also with developer -B- sales would start two years after investing, thus allowing the profit to increase. In this example at 20% per year. (this of course could be a little more or less) but 20% has been the average in most areas of Cyprus over the last 5 years.

Example #1 from developer A

6 Apartments  @ 80m2
Total Covered area	460
Investors per £ m2	£1,138	£523,480
Retail price £ m2 sell off Plan	£1,500	£690,000
Profit per m2	£362
Total profit		£166,520
Gross Profit percentage		31.81%
Stage payments over 24 months	30% Deposit	157044
	25% In 8 Months	130,870
	25% In 16 Months	130,870
	20% On Delivery	104696
Mortgage % bank payments			13086
Bank set up fees			2600
Lawyers fees			3000
Land registry fees			780
Sales agents fees @ 5% + VAT			39675
Total fees			59141
Profit			£107,379
Margin			15.56%
Capital used Deposit +	Interest & Bank fees	£172,730
	Profit	£107,379
ROI		62.17%

Example #2 from developer B

6 Apartments  @ 80m2
Total Covered area	460
Investors per £ m2	£1,138	£523,480
Retail price £ m2 In Two Years	£2,160	£993,600	At 20% increase pa
Profit per m2	£1,022
Total profit		£470,120
Gross Profit percentage		89.81%
Stage payments over 24 months	20% deposit	£104,960
Mortgage interest on 70% @ 5%		NIL
Bank set up fees		NIL
Lawyers fees			3000
Land registry fees			780
Sales agents fees @ 5% + VAT			39675
Total fees			43455
Profit			£426,665
Margin			61.84%
Capital used Deposit		£104,960
	Profit	£426,665
	ROI	406.50%

As you will see the return on investment is

406% with developer -B- against

62 %  with developer -A-

A very big difference, however with developer -A- you would start to sell the apartments from day one and could return your capital if you sold to buyers who paid you a 30% and then stage payments to coincide with your stage payments to the developer.

On that basis if you sold all the apartments within 6 months you would collect deposits of £207,000 (30% of the retail sale value of £690,000)

This would generate an immediate profit of £50,000 - the difference between your deposit and the buyers. nearly 50% of your profits are then made in 6 months

Recovering your capital fast is a safe option and there would be no concern to make the stage payments. You could then re-invest the capital and profit in another project.

Or you could wait to make sales for the next year where prices should rise by 20% or so. For each £100 m2 will give an extra profit of 8%

There are all these and other options that you will consider depending on

• How fast you want to return your capital
• Do you want to wait two years and take advantage of the market increase
• Do you require the capital to re-invest
• Do you want to Play safe because of moving market conditions
• Is this your 1st time investing? You really need the advice of a Business Estate Agent - not a sales agent, not just any agent, but from an individual or business who can show you how they manage others portfolios and who invests themselves. Talk is easy isn't it? One such company is Property Direct Cyprus click for details.