Everything you need to know about Off Plan Property Investment
There has been a significant rise in interest for off plan property in recent years, and not without its reasons. With lower purchase prices and more control, it is a popular choice with property investors and residential buyers alike.
Off plan investments are ideal for those who are savvy with property, have confidence in the market and a strong understanding of the industry as a whole. However, the process isn’t always as straight forward as some might expect. Due to the attractive benefits, many don’t always see the potential pitfalls when investing in such a property. Although it seems like an easier option for some, any glitches in the process can have a negative affect if due diligence isn’t done correctly from the outset.
A rising market
Figures from the Office of National Statistics showed that the construction industry has seen continual increase over the last year, suggesting that demand still outstrips supply for off plan properties. These days, it is not uncommon for an entire development to have been sold without building work being completed. Popularity is partly down to smaller upfront payments which can be as little as 10%. Discounts also tend to be available for property investors who are able to buy multiple properties.
When it comes to new build developments, a buyer can have a great investment from the start. Despite not having a physical property to view, securing a deal early can give you a greater chance of getting a more desirable unit. Buying the property before it’s been built, for a negotiated price, allows the opportunity for prices to rise while it’s under construction. So, by the time it comes to be build complete, it could be worth much more than what it was initially purchased for, giving the investor a fantastic deal.
It can be risky
Off plan developments are not without negative aspects. Those who are purchasing purely for buy to let purposes will see no immediate income from their investment. The development will need to be built and possibly furnished before it is tenanted, so it can take time for the property to generate an income.
It’s also important to work with experienced builders and developers with good track record and ensure that exchange deposits are held by the solicitors so should anything go wrong with the build process, you money is refunded back to you.
As with any type of investment, there is always a small chance that a property could decrease in value. Although this is highly unlikely given the current state of the buy to let market and consistent demand for off plan developments, it is worth investors being aware of this before choosing to invest.
Think about the long term
For those considering an off plan investment, attention to detail is essential. With off-plan developments, investors will not receive an income until the property is actually built, so it may not suit those individuals who are focused on generating immediate revenue.
Many investors benefit from planning, and thinking ahead could be the key to avoiding complications along the way. Things can always go wrong with any kind of investment so it’s good to prepare for the worst. Some investors choose to view a property before making an investment and developers can usually provide floor plans and 3D graphics as a guide. For these purchasers, it is vital to be clear on every detail in order for their expectations to be managed.
Confidence is key
Despite potential downfalls some may experience with buying a property off plan, there are many who reap the rewards of getting in early and purchasing these types of developments. It pays to be clever with decisions. Think about the key factors that are likely to result in a successful buy to let investment:
- Has the area in which the development is located proven to be consistently popular?
- What are the prices for similar properties in the area? Is it a good deal?
- Is there rental demand in the area? What sort of yields would the property generate?
- Is it an area that would provide strong capital growth?
- Are you working with trusted builders and developers?
It’s not uncommon to feel overwhelmed by the pressures that come with purchasing a property off plan. Many investors choose to seek professional advice from property investment advisors before considering a purchase.
It pays to do research when it comes to investing in property no matter what kind of development. With off plan, the risks are very clear so those in doubt need to consider if a new build is their best option. However, for those who are confident with their decisions then an off-plan investment is often a proven strategy to generate excellent returns.