It’s tempting to purchase off-plan or pre-construction real estate in countries like Nicaragua or Costa Rica, especially if you’re strategy is capital appreciation.  You can expect lower prices than for completed property and, if all goes well, you’ve got the promise of a strong return when your property is delivered.  It all makes sense if you don’t mind the wait and the market is showing growth.  But there are risks involved.

Here are four tips to get you on your way:

1) If you’re looking strictly at investment return, you’ll want to sell your property or rent it out once it’s completed.  It’s important to think hard who the end-user of your property will be.  Ask yourself if there is enough demand in the area.  And ensure that any planned community amenities (such as the clubhouse, restaurant, golf course) will also be complete when your property is delivered.

2) You’re taking on some early development risk when you purchase off-plan, so make sure that your down-payment is small, with the remainder of the balance paid off against progress.  It’s a good idea to hold back the last installment until the keys are given to you.

3) Make sure that the developer is financially stable.  You don’t want construction of your unit to stall or suffer long delays.  Try and see examples of past projects completed successfully by the developer.

4) Choose areas where demand is highest.  You want activity in the market so that the project moves forward quickly and there is demand for your property on completion.  On the other hand, very popular areas can over-heat so check that things are not going too far or you may face the risk of over-supply.

The starting point is to understand that pre-construction purchases are normally higher risk than turnkey property.  The price you pay should be low enough to compensate for this.  If you get your strategy right and manage to isolate the great deals, there are great gains to be made.