The Ultimate Guide to Off-Plan Property
The complete guide to Off-Plan property, whether you’re a seasoned investor or first-time buyer. Off-Plan property is a truly flexible asset, allowing you to take full advantage of emerging locations with sustainable demand, incredible regeneration and an exciting growth potential.
What is Off-Plan property?
Off-Plan property is purchasing a property during the construction part of the building process. It’s usually purchased at a discounted price to the actual value of the completed state making it attractive to property investors. Generally, the investor will need to pay a reservation fee and a deposit. The deposit can be anything from 10-20% and upwards of 30% depending on the developer and development.
Why buy Off-Plan property?
Purchase Below Market Value
There are many advantages to buying Off-Plan property, all of which contributes to the overall aim of capital growth and a secure investment. With a rapidly growing housing market, many investors are taking advantage of purchasing the property at a lower price before completion.
Select Specifications & Units
Another attraction to an Off-Plan property is the freedom of selecting your preferred unit. If you’re happy with the location and developer, you usually have the choice of a specific location, features, rooms and much more. Furniture packages are also available for those looking to quickly kit out their home hassle-free.
Of course, Off-Plan properties are new or refurbished builds. This guarantees a contemporary build which benefits from modern features such as energy efficiency, environmentally-friendly specifications and other requirements that new builds have to apply to. This generally leads to cheaper bills for tenants and potentially higher rental prices.
Video Guide: Complete Guide To Off-Plan Property
There are many advantages to buying Off-Plan property, all of which contributes to the overall aim of capital growth and a secure investment. With a rapidly growing housing market, many investors are taking advantage of purchasing the property at a lower price before completion. Watch our guide to off-plan property video to understand the full process of buying Off-Plan property and what to watch our for if your looking to invest off the plan.
Why buy Off-Plan property? (0:22)
When to buy and sell Off-Plan property? (0:51)
What to know to make a good Off-Plan property purchase? (1:51)
When to buy and sell your Off-Plan properties?
When to buy and sell your off-plan properties is all down to personal choice. Many people choose to sell the property once it’s completed, reaping the rewards of capital growth during the build process which may take a few years. SevenCapital Off-Plan Past Performance demonstrates as high as 30% growth over the build process.
Others choose to rent out the property achieving higher yields and creating sustainable capital growth over many years. Rental yields vary depending upon location, purchase price and demand within the area.
Selling Off-Plan property before completion
When it comes to Off-Plan property investment, as with any investment, there are many different benefits but you should always have an exit strategy.
Many investors run with a strategy of selling off-plan before it completes but this can come with several risks. That said, if your circumstances change, you may find yourself in a position where selling is necessary.
Selling Off-Plan before completion is dependent on your contract. Some developers stop investors selling to avoid ‘flipping’ off-plan property. If your contract allows selling before completion, just remember that more often than not, you can’t simply sell the Off-Plan property to a third party unless the contract allows you to.
If you decide to sell before completion, don’t forget to consider any capital gains tax, selling commissions and legal fees that come with the transaction.
How to buy Off-Plan property
To buy Off-Plan property you first must either find your trusted developer/agent or find a suitable development to suit your needs. If you’re opting to choose a developer first, then this goes back to building trust and doing your due diligence.
Look into how well the developer has performed in the past, and make sure you are confident in the delivery of the project. If you opt to choose your development first then your in the research phase of the areas, regeneration and again back to who is developing the project.
How to make a good Off-Plan property investment
Here’s a breakdown of the key things to look out for when looking to make the right investment for you,
The location of your investment is absolutely key when looking to stimulate growth within your purchase. Almost the entire UK property market is growing but some areas faster than others. As an example, since the 2016 Brexit vote property prices in regional cores have increased by double digits – Birmingham leads the way with growth of 16%.
Watch out for regional growth plans such as Birmingham’s ‘Big City Plan’ which aims to make transformational changes to create a world-class city centre. Regeneration in key areas can create new amenities, attract new business and build better connectivity – all contributors to rising tenant demand.
Transport links are always highly-desirable for investors, attracting working professionals that want an easier commute. As an example, consider the two-largest transport developments in the UK right now – Crossrail and HS2 are delivering faster, more efficient services across the Midlands and the South.
Discover the hotspots of tenant demand before you consider making a Buy-to-Let off-plan purchase and don’t be afraid to choose quality over cost. A quality product attracts a premium tenant that will deliver premium rental yields. This also ensures a consistent stream of rental income to mitigate void periods.
What are the risks of buying property Off-Plan?
As with any investment, there are elements of risk and that’s why it’s very important to go with a property developer that is trusted. Firstly, it’s important to know the developer working on the project. Research the developer and ask the questions; How many developments have they completed in the past? What are their building standards for these completed projects? Are they financially stable? Finding out these answers can set your mind at ease and help avoid the worst-case scenario of losing deposits if the developer goes bust.
There are also external factors to be aware of before making an Off-Plan property investment such as property values falling. This could affect lending on the property meaning your deposit will need to be higher.
Ensuring you also have guarantees on your property such as SevenCapital’s 10-year structural guarantee is vital and you should always check to see if it’s included in the contract with your developer. This could protect you against defects that may occur when you complete on your property.
Always speak to your financial advisor in advance and during the process.
Help to Buy Off-Plan properties
Help with buying off-plan property can now be found through government schemes such as ‘Help to Buy’. This is a Government Equity Loan that lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.
You can find more information on the Government Help to Buy website.
Video: Top #5 Tips For Off-Plan Property Investment
Are you interested in property investment? Off-Plan property is a great way to purchase real estate typically below market value during the construction process. Here, Liam Smith a Senior Investment Consultant from SevenCapital talks through the ‘Top #5 Tips For Off-Plan Property Investment’.
1. Find Your Objective (0:15)
2. Research (0:42)
3. Trust (1:24)
4. Confidence (2:01)
5. Due Diligence (2:24)