Purchasing an apartment that is still under construction can seem daunting, but it offers significant financial benefits
It’s natural to feel hesitant about buying an apartment that exists only on paper. We tend to trust tangible investments we can see and touch more than abstract plans. However, fear and discomfort could cost you a smart profit if they stop you from securing major savings by purchasing pre-construction. Conquering the scary doubts in your stomach could put hundreds of thousands in your pocket. Here are five compelling reasons why purchasing an apartment off blueprint can make solid financial sense despite the perceived risk:
Increase in Value
An apartment typically appreciates 10-30% from initial purchase to project completion. Buying early allows you to gain this increase in equity. For example, a $300,000 profit on a $1 million purchase
More Selection
Early buyers get the widest choice of units. Popular layouts and sizes sell out quickly. Purchasing off floor plans ensures you get the unit you want rather than settling for what’s left.
Payment Flexibility
Staged construction payments allow you to pay as building progresses, not all upfront. If values rise during that time, you earn full gains by selling, despite only partial capital investment.
Tax Advantages
In Israel, capital gains tax applies when selling an investment property. Specifically, profits older than 2 years incur a 25% tax. That could mean owing the state a significant sum like 125,000 NIS.
However, a notable exception exists. If you sell within 18 months of purchasing a new property, even existing holdings get exempt from appreciation tax.
This relates to buying pre-construction in an important way. The 18-month clock starts ticking at occupancy, not purchase. So, if your off-plan apartment takes 2 more years to build, you gain that much extra time to sell other units tax-free. This flexibility makes finding buyers less rushed and stressful. The tax rules essentially reward those who take the perceived risk of purchasing apartments on paper. You enjoy more freedom to market properties at your own pace rather than being under tight deadlines
The savings in renovations
It is much cheaper to customize floor plans than to renovate later. Pre-construction changes to layouts, electrical, lighting, walls and more save significant sums over altering a finished unit.
While waiting years to occupy a purchased apartment can feel risky, the financial upsides make buying off plans worthwhile for many buyers.
