Buying of Plan

Hi There,

I have currently been offered 2 properties at a prelaunch price around 5000euro below luanch price,it go's somethng like this,he will accept a 7% deposit and the rest at closing.

I am hoping to sell the house before closing and assigning the contracts as heard that this is possible and I would not have to pay7 stamp duty.

Price prelaunch:205K with 7%deposit of 14K

Launch price:210K

Build time approx 9 months

Sale price based on projected priserise: 224K approx

Profit 19K approx

Thats the basics guys but I am not sure of :

1)Tax position on profits(if lucky)

2)How does the legal side work is this possible to do and how(assignable,subcontacts etc)?

3)What if I cant sell whats my position?

4)Anything else that can go wrong,besides house prices decreasing?

Thanks

Why do you think the builder is offering you a chance to make €19k in 7 months?

RainyDay said:

Why do you think the builder is offering you a chance to make €19k in 7 months?

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Its being offered through an agent and it was recommended by both my cousin and solicitor both of who are investors and know this builder.I'm honestly not sure why he is releasing the initial houses perhaps its to strenghten his relationship with the bank.Is it common for builders to make these offers I heard that it is.
I would be grateful for any advice

Just seems strange to me that if there is such easy money there to be made, why wouldn't the builder keep the easy money for himself. Have you reviewed the numbers and checked out your position if there is litte/no growth in the market price over that time?

Just a word of warning.

I have recently heard of a builder doing the same thing - pre selling to fund the development and encourage the lending institute to release the loan.

At the end of the building phase the builder refunded the deposits and kept the apartments and rented then out. Unfair, but legal!

Thanks guys,

I do understand that if the propertymarket has zero or negative growth I am in trouble however I can absorb at loss or I could complete on the purchase as a buy to let until the market recovers.
As regards to the builder keeping the properties i will certainly find out more about them.However,I will have a contract which would be assignable will this not oblidge the builder to honour the deal?
Thanks for the help guys,I find this board great for making me ask the questions I might not ask myself,

Regards,

Patrick

you wont have a contract at all. You said so yourself. You might have the builders "word" or a promise. But nothing to legally entitle you to the house. The only document that gives you 100% ownership is when the house is built and you sign for the deeds. at this point stamp duty comes into play. But you are hoping to avoid this by selling you contract. This is common enough in the states.

mhspurs: Sounds like some shify builders found a way to use OPM. (other peoples money)

POD1. I don't think there is necessarily anything ify about this sort of transaction from the builders perspective. It makes perfect sense. The builder needs to sell these houses, he needs some security in the early stages and he needs to finance his project. He needs to manage his own risk and gaurantee sales. He also needs to gather some momentum for this project and this seems to be a very sensible transaction as far as I can see. While I would always advise caution on any investments, I think people shouldn't always be so suspicious of every opportunity. Yes you might make mistakes but you need to manage your risk accordingly. Go through all the what-if scenarios and make your decision based on that. You already have your two friends' word of mouth recommendation which is worth a lot. I think you know what to do if the price falls, you rent it out until you regain your capital and then you get out. In my non-expert and humble opinion, this is a good, quick, profit making deal and I would go for it if I was happy with all the legal stuff. Good luck.