Top Questions About Off-Plan Property Investment
In a time when housing demand continues to exceed supply by substantial volumes, the principle of investing in a property before it’s built isn’t uncommon. Buying Off-Plan property has a slightly different initial process to buying pre-tenanted or pre-built Buy-to-Let properties but comes with its unique advantages and benefits.
What does buying Off-Plan property mean?
Simply put – Off-Plan property investment is committing to a purchase before the property is built. The buyer will generally make their decision based on floorplans, market research and early impressions of what the development may look like.
What are the biggest benefits of an Off-Plan property investment?
Off-Plan is typically chosen because of its potential for returns, the guarantee of a new-build development and opportunity to buy in a competitive location.
When compared to a Buy-to-Let purchase, Off-Plan property will typically have a lower entry price and has the potential to rise in price through natural capital growth during the build phase. Once it’s complete, it can then start delivering rental income on top of this growth.
The downside? Investors often have a 1 – 2-year wait before realising any returns.
Purchasing Off-Plan property can also be an excellent way of investing in a highly-competitive market such as a city centre experiencing rapid growth. Buy-to-Let opportunities happening in these areas will be highly sought after and buying Off-Plan can be a great way of getting in at the figurative “ground floor”.
Does Off-Plan property come with an incentive?
While not all investments will be the same, Off-Plan property investments typically offer bonuses for early adopters. People that get in early can have their pick of the development – ideal if you’re looking for a specific property type or want features such as a balcony. In some cases, developers may offer discounts so that investors can secure even more capital growth potential – buyers will benefit from any price rises in property on top of the negotiated discount.
The biggest incentive however, in an upward market, is realising capital growth on the whole property value whilst only paying a percentage deposit.
How can I ensure an Off-Plan property is completed to a high quality?
As you’d expect, one of the biggest concerns for many Off-Plan investors is the completion of the property. The best way to ensure these assurances throughout the build period is to work with a trusted partner that has a clear track record of completing projects.
Speak with the developer about their assurances, warranties and any admin that should be covered while researching their background. Take the time to view previous properties and the standard they were developed to. Some developers may also offer tours that you can take to get a view for yourself.
As with most investments, timing is vital so working with a developer that can deliver to a schedule is important for helping you set realistic and achievable goals.
How does the buying process work?
The Off-Plan property buying process is relatively straightforward in theory, although it’s important that you speak with professional advisors at each stage of the journey – consider meeting with a financial advisor to ensure that you’re in the right place to progress.
Put simply, the process starts with you researching your chosen location. Once you know where you want to invest, choose your plot and put down your reservation fee. Appoint a legal advisor to deal with any legal matters before completing paperwork, exchanging contracts and paying the deposit. Mortgages won’t be needed until completion but do check you’re eligible before you continue.
At this point of completion, you’ll typically go through a ‘snagging’ process which checks for defects in the product before your completion day. At this point, you may need to pay Stamp Duty Land Tax and the rest of the balance if this applies to you.
Who will manage my property?
Property management is a vital part of the Off-Plan process and typically, if you’re buying Off-Plan in a new-build development, you’ll have a management resource assigned to you that can help with maintenance, rental returns, letting and aftercare.
Depending on how hands-on you want to be, a good property management company can be a huge difference in making your investment work harder for you. They can help mitigate void periods between tenants and also take the hassle out of maintaining your property, which can be a huge time sink.
Can I sell my Off-Plan property before completion?
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.