Investment Property Morocco

Economic Factors | Investment Growth | Due Diligence | Why Invest in Morocco Real Estate?

Property Investment Strategies

There are different number of investment strategies available when it comes to Morocco property investment. Depending on the property investors' attitude to risk and objectives it may vary from short, medium to long term.

1. Short term - (18 – 24 months (this is also known as a Flip strategy)
2. Medium term - (3-5 years (also known as a buy to let strategy or buy and hold strategy)

It is important to be clear what the investment is trying to achieve AND by when it must be achieved. In this way it helps focus the investment decision

For example if the objective when buying a property in Morocco is to double the investment within 2 years then a Flip strategy would be favoured. Provided the Moroccan investment property has been chosen wisely it is more likely to produce the expected return than a buy and hold strategy in the chosen time period.

More experienced investors may start to look at portfolio investments across different areas or countries in order to spread the investment risk and achieve a more balanced return.

General Factors

In order to maximise your property investment opportunity and minimise the risk a number of general factors need to be taken into account when buying a property in Morocco:

The investment property in Morocco should be in an up and coming highly desirable area of the country. General construction levels should not be excessive, in order to avoid an oversupply in the market place and ensure lead times keep reducing for a sale and prices keep rising.

Economy

The economic condition of the region should be taken into account because a region that relies more heavily on tourism will be prepared to invest more into the infrastructure of the area to promote construction and tourism. The down side may be that too much planning consent may be allowed. Visit Property Morocco Economy

Political

The stability of Morocco is important. A consistent and stable political environment will lead to continual support of economic policies and investment, perhaps even encouraging foreign investment through tax advantages.

Logistics

To be attractive the area must be easy to reach! We always are looking out for new low cost airline routes, nearby airports, good road infrastructure.

Buying Off Plan Property in Morocco

Buying an off-plan unit i.e. a property that has either not commenced construction or is currently under construction and then selling the property prior to completion. In reality this is not a property purchase as the property has not been completed but is a purchase and sale of an option to purchase the property.

A key factor is the time taken to identify the investment opportunity as this is critical to the strategy's success.

Key Opportunity

The opportunity to purchase a Morocco property at a low initial price or in the case of Morocco at potentially an extremely low initial price before market forces lead to significant capital appreciation. Then sell the option whilst demand is increasing, taking advantage of normal supply and demand economics which means the price is increasing as more people want to buy.

Timescale

Typically the time period involved will be between 18 to 24 months, although this is dependent on factors such as the stage of construction of the development, the speed of construction for that particular country, etc...

Level of Complexity

This strategy is attractive to the investor because of its simplicity, the low initial investment typically 10% to 20% of the purchase price and some basic legal fees. The short payback period allows the investor to recover their cash relatively quickly for reinvestment in other developments.

In addition the investor has not been left with a long term liability that needs to be serviced such as mortgage payments.

Key Risks

The critical element and therefore the highest risk element to the success of this strategy is the sale of the property prior to completion otherwise the investor will be forced to complete on the purchase with all its associated legal and financial consequences.

The investor must be clear on the mechanisms available to resell the option, whether that be privately through an existing database of buyers, a private advertisement, a website or through more commercial means such as estate agents, website portals etc.

Return

This type of investment is a speculation of capital appreciation and therefore returns can fluctuate greatly dependent on how popular the country, the area and even the development becomes. A good investment based on an annual growth rate of 10% could lead to returns of in excess of 50%.

Taxation

Taxation rules are very different country to country, therefore specific expert advice should always be sought regarding the subject.

Although the option to purchase the property is a legally binding contract, in itself it is not a property purchase therefore will not be treated as a property transaction with the associated registration procedures and taxation such as stamp duty or the vat equivalent.

As the transaction is a private contract which will most probably take place outside of the country the investment is in, the resale of the option to a third party will probably not incur any taxation unless you choose to declare the gain in that country.

Please remember there is an obligation to declare all income and gains to the relevant tax authorities. Visit Property Tax Morocco.