Investing in Moroccan Property - Due Diligence

Overview

As with any investment, it is essential that prior to buying a property in Morocco you carry out comprehensive research to ensure you are well informed on all aspects of your proposed investment. Fair Deal (Property Morocco) is designed to help investors interested in Moroccan property with this initial research and to make available a vast amount of information, allowing them to make educated decisions about where and which Moroccan property to purchase and to generate the type of returns they desire within the required timescale.

There are two major types of initial due diligence that every investor is recommended to undertake:

Due Diligence - The Investment

Firstly it's essential that the investment itself is in line with your expectations as an investor and that you can realistically achieve your expectations for the proposed investment.

Return On Investment / Risk Level

Typically early entry into emerging markets offers the highest return on investment but, in many circumstances, this is also associated with the highest levels of risk. As we as investment property consultants deal with Moroccan property that is primarily an investment vehicle the main purpose should be to generate substantial returns for you, the investor. It is therefore essential for the Moroccan property investor to understand the entire purchase procedure from start to finish, including exactly what funds are required and at what stage of the purchase, allowing for accurate cash flow analysis and maximum financial leverage.

Our Moroccan property advisors can assist you with all aspects of your investment and recommend our professional financial partners to work with investors on strategy calculations. However we insist that every investor looks at an investment in detail and seeks advice where needed to ensure it is completely suited to their individual requirements.

If a market is expected to offer continued growth, it is important that as an investor you understand what the "market drivers" are for this growth. Some common "market drivers" are listed below:

Location

This is always a major factor with any property investment. The location of an investment is directly linked to the return on investment an investor can expect from both capital growth and rental yields. We recommend that investors look at current property and rental prices in the direct and surrounding areas of any proposed investment to gain first hand knowledge of pricing and, where possible, they should personally visit the area.

Cost / Value

A property purchase is only an investment if it is purchased at the correct price, allowing for its value to appreciate and/or generate solid rental returns in proportion to its cost.

Infrastructure

An excellent sign of an investment property hotspot is when there are considerable infrastructural improvements being made to an area. Generally this includes local attractions, services and amenities, but also, and often most importantly, additional airports, ports and roads, as well as secure signs of growth and firm commitment by a local government to help improve an area.

Natural Factors

These are often the most obvious "market drivers". Many locations base their bid to increase tourism and property demand on the fact that the area enjoys excellent weather conditions and can offer stunning beaches, tropical views or are positioned next to a mountain ranges offering quality skiing conditions. These factors are obviously very important, but it is essential that other "market drivers" are also considered in association with these.

Tourism

Tourism is the primary factor that enables many emerging property investment locations to create a successful property market. With increasing low cost flight destinations and the world becoming effectively smaller, the door is open to many relatively unknown destinations that are beginning to offer new and exciting holiday destinations to tourists around the world. Today's tourist is after all willing to try new places after experiencing the same traditional locations for too many years.

Stability

With terrorism around the world on the increase and many political, religious and legal implications to consider it is essential that the stability of an investment location is considered prior to any investment. Political stability of a location can act as a very strong investment market driver.

Due Diligence - Developer / Constructor

Once your Moroccan property investment has been analysed and discovered to be a viable investment opportunity offering the required returns on investment within the desired time scales, the investor must be sure that the vendor is reliable and secure. There have been many documented cases of developers taking funds for projects for which they do not even own the land title, or building permission having not been fully granted. Construction has consequently been halted, often resulting in the investor loosing all or part of the investment.

The good news is that these situations can be easily avoided and Fair Deal Morocco works with the investor to ensure that projects we offer meet certain criteria. This ensures that all our Moroccan property investments are as secure as possible, allowing our clients the best possible opportunity to safely maximise returns from every investment. Some of the usual checks carried out are listed below:

Bank Guarantees

A guarantee stating that if the developer or constructor runs out of funds prior to the completion of a development project, the bank or insuring party will return funds to the investor (usually including compensation).

Building Licenses

These licenses required prior to construction. Many projects work on a pre-release basis and these licenses may not be in operation at this stage. Fair Deal (Property Morocco) offers pre-release opportunities to investors, allowing for the earliest possible entry into projects. In the case of pre-release opportunities, monies should be held in an Escrow account or client account of a reputable lawyer and only released to the developer when all relevant licenses are granted.

Developer Background Checks / Track record

It is important that a developer has a traceable background and experience. Often previous projects are a good point of reference to future projects. Fair Deal (Property Morocco) will look to offer projects from experienced developers with high standards and a reputation for completing on time.

Land Title Confirmation

Obviously any developer must own the land they intend to construct on. In the past there have been cases of rogue developers taking funds from clients for properties and never having legal title to the land. This is rarely a problem today and is easily checked. It is also essential that an investor understands that he/she is buying a freehold property and that title of the land will be transferred upon completion.

Re-Assignable Contracts

Although not as common as in the past, due to the uncertainty of the investment, some investors look to operate a "buy to flip" strategy. This basically means the investor will look to place a minimum down payment to secure a property and look to resell the unit(s) during the construction process, prior to completion. In order to do this the contracts must be re-assignable and any administration fees must be highlighted. Without these factors being fully understood, the investment strategy could be rendered useless.

Fund Security

Fair Deal (Property Morocco) looks at the buying process and ensures it is as secure as possible for investor members.

Build Quality Guarantees

All good developers offer a guarantee on construction and a detailed quality specification. We at Fair Deal Investments makes sure these qualities and their offered guarantees are to a required high standard. Building specifications are also made available to investors.