These simple questions will help investors get the best pick of units, the lowest entry pricing and assured returns from an off-plan investment.
What does buying off-plan really mean?
What are the biggest benefits of off-plan property investment?
How do I find the right location?
How can I ensure the property is completed to a high quality?
How is my money safeguarded?
How does the buying process work?
How can I identify a good developer?
How do I know the property will be delivered as planned?
Who will manage my property?
What are the incentives of buying off-plan?
Off-plan investment properties can offer buyers significant benefits – most notably the greater potential for growth and profitability that comes with buying at a low price before the property is even built.
If you are considering this route into the UK market, it’s a good idea to learn as much about it as possible before going ahead.
With that in mind, Experience Invest has put together ten key questions worth asking about off-plan property investment. The questions cover everything from how to ensure the quality of the build, securing the right pricing and how you can maximise your off-plan purchase.
1. What does buying off-plan really mean?
Off-plan property investment involves committing to a purchase before the property itself is constructed. The buyer has to be prepared to go ahead with the deal before they have seen the finished result, basing their decision on initial plans, blueprints and artists’ impressions of what the completed development will look like.
In times gone by, the idea of committing to an investment before the property had been built would have seemed outlandish, but today, buying off-plan is not uncommon.
For regular homeowners, reserving an off-plan property is sometimes the only way to secure a home in a market where demand for housing continues to exceed supply by a substantial margin.
Buy-to-let investors are likely to be attracted to this type of property because of the increased potential to secure returns on their initial outlay.
2. What are the biggest benefits of off-plan property investment?
Many buyers are drawn to off-plan developments by the promise of strong capital growth, which is one of the main financial metrics used to evaluate the success of buy-to-let property investment, along with rental returns.
Agreeing to a deal before construction work is complete – and sometimes before work has even started – increases the likelihood of securing a low entry price. Developers tend to offer lower purchase prices at the earliest stages of a project appeal to investors and lock in buyers as quickly as possible.
If you buy early and secure a low price in an area where the housing market is going through a period of strong growth, there is a good chance your investment will increase in value before the development is even ready to welcome tenants.
For this reason, one of the most important parts of off-plan property investment is finding the right location to buy in.
3. How do I find the right location?
Since the property itself is not available to view at the time of making an off-plan purchase, finding a location that has the right characteristics for a successful investment is hugely important.
For buy-to-let investors, one of the key considerations will be the strength of rental demand in the area. In popular towns in London’s commuter belt, for example, there is a particularly high likelihood that desirable apartments coming onto the market will always attract demand from people who want to live within travelling distance of the capital.
The same principle applies in the UK’s most popular university towns and cities, where the student population is a vital and dependable source of tenants for those who have invested in buy-to-let property.
General price trends in particular areas are also an important factor for off-plan investors, who will want to secure a low entry price but also feel confident that the value of their property will increase.
Property portals like Zoopla and Rightmove are a good starting point for investors to start their initial research. Local estate agents may also provide in-depth information if you require detailed information about rental rates.
Liverpool is a good example of a location currently offering this attractive combination of features. The north-western city had the lowest current price of any destination in the latest Home track UK Cities House Price Index, despite having seen growth of six per cent in the past year.
4. How can I ensure the property is completed to a high quality?
Understandably, investors committing to an off-plan purchase will be looking for certain assurances while construction of the property is ongoing. One of the best ways to gain peace of mind that certain quality targets will be met is to invest in a development that is covered by a warranty, such as Buildmark from the National House Building Council.
Buildmark is a ten-year warranty scheme that provides protection for newly built or converted homes, starting from the initial exchange of contracts.
Past the pre-completion stage, Build mark provides assurances including a builder warranty and an independent resolution service should any problems occur up to ten years after building work has finished.
Having these sorts of protections in place could bean essential factor for any buyer entering the off-plan property investment market.
5. How is my money safeguarded?
Any credible developer will want to ensure that your funds are protected throughout the construction period.
Most off-plan property investment will require you to make stage payment throughout the build and a balance on completion. The percentage required at each payment date will be highlighted in the contract.
It is important for you to establish if they have a Project Monitoring and Quantity SurveyingCompany instructed, which is not only independent of the Main Contractor, but tasked with overseeing their work. They will be instructed to scrutinise the work of the Main Contractors and that it is completed along with the invoices they produce. This will ensure that your funds only go towards works completed and not forward paid for works not yet carried out.
A good property developer will be transparent on the way your funds are managed and released to the individual contractors throughout the stages of the build.
You should be sent regular monthly or quarterly construction updates, so you can see where the money is being spent, the quality of the work, and that the construction is on schedule
6. How does the buying process work?
Buying an off-plan property is straight forward. All purchasers should seek advice from an independent solicitor that specialises in UK property.
If there are stage payments in place, ensure that you know what percentage is due and when. Your solicitor will be able to advise you on the payment details on your individual contract.
Investors should make sure the relevant legal contracts between the Developer and the Contractors are designed to protect the interest of investors.
Any successful purchase is dependent on the advice you receive from your chosen LegalAdvisors. Your solicitor is there to protect you and you should ask as many questions as you like to ensure that you feel that they have sufficiently protected your interests.
Ensure that your solicitor has scrutinise all the contracts. This will ensure that project has a greater chance of being delivered on time and on budget. It is also important to establish what legal protection is in place if the development is delayed.
7. How can I identify a good developer?
An established off-plan property developer will have a portfolio of completed developments which they should be very happy to show prospective buyers.
In terms of property investment, the timely delivery of any project is dependent on the reputation and track record of the Construction Company that the Developer uses.
With any off-plan purchase, timing is everything and the sooner the property is built the sooner you can earn from your investment. It is therefore very important that you do your due diligence and potentially visit their past projects as well as their current projects under construction.
8. How do I know the property will be delivered as planned?
In addition to schemes such as NHBC’s Buildmark, one of the best ways to feel confident that any property will be completed and ready to welcome tenants on schedule is by working with an experienced, tried-and-tested developer.
Opto Property Group this year received recognition for its achievements in the industry when it received the title of Developer of the Year at the Property Wire Awards, and was nominated in the same category at the National LIS Awards.
The firm has also underlined its credentials with its work on New Bedford House in Luton, which is due to be delivered on time and on budget, and the progress of Opto Student Newcastle, scheduled for completion in Q3 2019.
If you are considering an off-plan property investment, the experience and expertise of a seasoned developer such as Opto Property Group could be a key factor in your decision to go ahead with the venture.
9. Who will manage my property?
If you’re buying an off-plan buy-to-let apartment within a new build development, a management company is typically appointed to take care of the everyday maintenance and rental returns.
A good property management company can often be the difference in making your property investment work harder for you. They can help reduce void periods between rents as well as ensure that the property is maintained throughout each tenancy.
The UK’s Build to Rent sector has emerged as a popular way for investors to secure a rental return from an off-plan property investment.
This type of off plan property investment is designed with the end user in mind and provides a high-quality option for renters. Investors benefit from a fully managed apartment which appeals to the local rental market, allowing landlords to achieve a stable rental return from a property located in an area with high demand.
10. What are the incentives of buying off-plan?
Off-plan property investments offer buyers a range of incentives. Those entering at the earliest stage can secure the best units within the development. This is particularly important for buyers purchasing an apartment within a building that offers views like Infinity Waters in Liverpool, or a courtyard facing apartment within Imperial Square.
In some cases, developers sell properties with an off-plan discount to allow investors to secure the strongest capital growth potential. Buyers benefit from any rise in values of property in the local area throughout construction on top of the negotiated discount at purchase, allowing them to secure the best possible capital growth potential.
To help investors to source the best deal on an off-plan investment property, Experience Invest uses its established track record and industry expertise pinpoint the best locations to maximise returns.
With a strict due diligence process in place, Experience Invest conducts all the necessary checks to ensure that the property is in an area that offers strong growth potential. To underpin rental returns, the team looks at local market conditions and factors in how demand will change over the coming years.
If you’re looking for discounted off-plan investments, all opportunities are exclusive to Experience Invest to allow investors to secure the best pricing.
To find out more about current opportunities in the market, contact Experience Invest today.