5 Common Off-Plan Investment Mistakes
When it comes to property investment advice, particularly off-plan property investment, there’s no shortage of information how it should be done.
For us, however, it’s also important that you’re aware of the potential property investment mistakes you could make and how they can be avoided.
It can be difficult for some property investors to get past their first property, never mind second or third.
What follows is an in-depth look at some common property investment mistakes we’ve seen and how you can avoid the same pitfalls.
Not Planning Enough
It might sound simple but planning correctly can sidestep any potential issues further down the line. Successful property investors understand what they’re trying to achieve. You need to set yourself a realistic goal with a clear path to fulfilling each objective. Determine where you want to be and how you’re going to get there.
Are you looking for capital growth or rental yields? Where are you planning to invest? Is your strategy a long-term investment plan or more short-term? These are all questions you should ask yourself before you get started.
You’ll also want to identify the amount you have available to invest and what investment will get you the most value for money. This is where forecasts, rental yield predictions and other informative pieces will help.
Missing Out On Vital Research
An important part of the planning stage, research is key to choosing the right location, type and term for your off-plan property investment. Ensure you research general property investment strategy and keep an objective view of any particular developments you already have your eye on.
If you’re looking to invest in Birmingham for example, research the area. Chances are you’ll be investing in somewhere you might be unfamiliar with so take every opportunity to learn about the area. Read blog posts and guides regarding the development surroundings. Visit the site and those around it. You can never know too much about your investment so don’t be afraid to look, or even better, ask those in the know.
Some common things to look for include regeneration sites – are they going to help your property appreciate? You’ll also want to look at population, growth in the area and general tenant demand.
Finally, research the developer. Knowing and trusting your property developer, especially in off-plan property investment is an important part of the process. Take a look at their past record, check completion times, identify build quality and find any past testimonials or investment case studies. What are people saying about your developer? Just like your investment, you can never know too much about who you’ll be working with. Remember, not performing the necessary research could lead to sub-standard returns or you missing your goals.
Don’t Let Emotion Rule
Heart over head. It’s not uncommon for investors to base decisions on emotion rather than logic, after all, it’s an exciting time.
It’s important to remember to stay analytical. Base your property investment decisions on data and you won’t go far wrong. Look at the gains and turns. Is it in a prime location to satisfy tenant demand? Does it fit your objectives?
Investing is about making smart choices and as long as these relate to your initial investment objectives in an economical, factual way, you’re putting yourself in a good situation.
Not Having The Confidence to Go Through With Your Investment
The point of reservation for your chosen property can be a nervous but exciting time. Confidence is key. Many would-be investors back out at this point and miss out on what would be a lucrative opportunity, but if you’ve done your homework then you should have no reason to worry about seeing your plan through.
By now, you should know what you want to achieve and have fully-mapped out all of your objectives. You’ll have researched your investment and found trust in the developer, enabling you to make a confident, informed decision that isn’t clouded by emotion.
It’s true that at this point you need full confidence in your investment as many other people would back out. It can be a nervous time but if you have the confidence to make your reservation, you’re less likely to miss out on something you could regret.
Skipping Key Due Diligence Duties
This is more a general rule of thumb. Due diligence is a major part of the process at each stage and can range from ensuring you have a good cash-flow to giving your legal aid all the information they need to perform their own due diligence.
A large majority of the mistakes that have been mentioned here can be solved with good due diligence. You need to know where to invest, what your cash-flow will be and have the confidence that your property will deliver the value you need.
It’s also recommended to seek professional advice from a tax or mortgage specialist when making your investment. Property investment can be a time-consuming and complicated process. Having a specialist on hand to support you will ease pressure and build confidence.
With tax reforms coming into place and a number of other considerations such as Stamp Duty and Capital Gains Tax, don’t hesitate to speak to a professional before it’s too late.