The most ideal time to buy off-plan property

The most ideal time to buy off-plan property

There are many ways you as an investor can benefit from buying property before it’s completed. One of the key ways in which to do this comes down to timing and when you decide to buy whilst market conditions favour it. In today’s article, I will be outlining the benefits of buying off-plan property and

The most ideal time to buy off-plan property

There are many ways you as an investor can benefit from buying property before it’s completed. One of the key ways in which to do this comes down to timing and when you decide to buy whilst market conditions favour it.

In today’s article, I will be outlining the benefits of buying off-plan property and just when is the ideal time for you to take the plunge.

Buying off-plan property

By purchasing property off-plan, you are buying your unit before it’s even completed. This may be a few months, a year or more in advance before it is ready to be inhabited. If you buy off-plan, then you are essentially buying at a discount because the property in question is likely to rise in value before it completes. This is because developers specifically build property in areas that have plenty of infrastructure being built and near various amenities nearby. This raises the price of property in the general area and therefore that of the off-plan property you’ve bought.

Where to buy off-plan property

As I’ve mentioned, some of the best places to purchase off-plan property is in locations where there is plenty of regeneration occurring. New infrastructure being built, improvements to transport links, in close proximity to several necessities such as supermarkets, bars, restaurants etc.

These are some of the factors that determine how attractive an area might be to live in. This in turn attracts more people to live there and in properties that are recently built that may gentrify the area. Prices therefore go up and the investor that owns the property profits and achieves one of the main goals for any landlord- capital growth.

Usually, a city centre undergoing big changes will offer much of what I’ve mentioned here. Cities like Liverpool, Manchester and Birmingham are examples of where to find several quality off-plan developments that look set to increase in price in the years to come.

When to buy off-plan property

As early as possible! As soon as the developer’s release the units onto the open market, that’s the most ideal time to purchase for two main reasons:

  1. Picking out the best unit according to price, floor and general specification. These go fast if you’re looking in an off-plan development in an attractive location, so the earlier the better.
  2. The longer you wait, the higher the prices can rise based on the area’s regeneration leading to house price increases in developments like the one you’re considering buying in.

Sometimes, there will be various phases of an off-plan development that are released and completed periodically by the developers. This allows them to sell in bursts and maximize their income by not oversaturating the market. If you are looking at a development in the 2nd or perhaps 3rd phase, enquire how well the previous phases sold. If they sold out in a short space of time, then it’s a popular development that is likely highly priced. If they struggled, then it might give you food for thought.

Obtaining a mortgage

It is possible to take out a mortgage on an off-plan property, although different lenders will have varying lending criteria and different products available. Because most mortgage offers run out after six months, though, it might be necessary to reapply if the development is set to take longer than this, and this carries the risk of the lender changing their offer down the line.

If difficult market conditions mean that the mortgage valuation survey values the property at lower than the price you originally agreed, a second opinion can be sought – although for savvy investors choosing developments in the most up-and-coming locations, this risk should be minimal.

Some investors choose to ‘flip’ their properties, which involves buying at off-plan price, then reselling before completion once the value has risen, which you can read about here.

Buying off-plan property comes with numerous benefits and it’s Tarquin Jones’ primary source of property investments. But it always comes with an element of risk which is why it’s essential to look into who the developers are behind the scheme and check if they have a track record of delivering their projects regularly and on time. We do the same thing with the property we scrutinize, but we always encourage our clients to do their own due diligence to give them full peace of mind regarding any off-plan investment.

For more information on our latest investment opportunities, click on the Investments tab on our homepage. Alternatively, give us a call on 0208 445 6542 or email us at info@tarquinjones.com for more details.

 

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3 important questions for a first-time property investor to ask

3 important questions for a first-time property investor to ask

The most important asset required in order to invest in a property is the obvious answer (money!) but rather the will to do so. I’ve spoken with hundreds of procrastinating investors who have the funds to invest with but never actually do it. On the other hand, I’ve encountered several would-be investors who don’t have

3 important questions for a first-time property investor to ask

The most important asset required in order to invest in a property is the obvious answer (money!) but rather the will to do so. I’ve spoken with hundreds of procrastinating investors who have the funds to invest with but never actually do it. On the other hand, I’ve encountered several would-be investors who don’t have the money but through months of stringent saving eventually build up their deposit so they’re able to invest for the first time.

Before they do however, there are some important questions to consider before parting with any of your money. In today’s article, I will outline these questions that you should be asking as a first-time property investor.

What do I want to achieve as an investor?

Again, the simple answer is “making money”, but there are a variety of ways in which to achieve that as a property investor. Your money may be made through renting out your property over the long-term and making a regular, sustainable income that way. Or you may choose to buy and sell relatively quickly in order to make short term capital gains.

The Tarquin Jones’ ethos is to buy new build property in an up-and-coming area, rent it out over the long-term in order to earn an income, and then selling it years down the line once the area you’ve bought in has improved and raised the price of your property.

In order to achieve this, you will need to do your due diligence beforehand regarding the area you’re considering investing in and some number crunching to make sure your returns and resell value will be sufficiently rewarding for yourself.

Do I want to manage my property myself?

In my experience of speaking to first-time investors, many will naturally be looking for an investment close to where they live because they’re under the impression they need to be in order to manage it. This doesn’t have to be the case- in fact, many buy to let investors that I know have never even seen some of the properties they own because they live safe in the knowledge it’s earning them a regular income.

They are able to do this because they have employed an experienced lettings company in the vicinity of the property to handle everything from finding an appropriate tenant, ensuring they pay rent every month and dealing with any repairs or maintenance issues. This will all be in exchange for a small percentage of your total income (around 10% is common) but many landlords are more than willing to pay this for the removal of stress it provides.

However, if you want to manage everything yourself, you will need to deal with all of this yourself which is akin to a full-time job in terms of managing the upkeep of your property. Many investors don’t have the time, effort and means to combine all of this with family and work commitments. Because of this, I would recommend the hands-off approach when it comes to property investment, although a hands-on role can be profitable providing you have the time and dedication for it.

What are my expenses?

Plenty of different factors can change the property market. A change of government, an increase or decrease in interest rates, a large company moving into an area, and new infrastructure build are just a sprinkling of things that can affect property prices and rental income.

We recommend calculating your cash flow numbers on a two-year basis and revisit every year. When considering costs, remember to include the following:

  • Mortgage costs
  • Property management fees
  • Insurances
  • Maintenance and repairs

You should also make an allowance for void periods. You can do a back-of-an-envelope calculation as a first estimate, but you’ll need to assess more accurately before proceeding.

These are some of the key questions to ask yourself before you enter the world of property investment. By taking these into account, you will be doing your due diligence in terms of what you want to get out of your property investment.

For more information on our latest investment opportunities, click on the Investments tab on our homepage. Alternatively, give us a call on 0208 445 6542 or email us at info@tarquinjones.com for more details.

 

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Why you should consider buying investment property through a limited company name

Why you should consider buying investment property through a limited company name

While it shouldn’t necessarily do so, increased tax regulations regarding Buy to Let property investment have deterred many prospective investors in recent times. One popular method to alleviate these is becoming more and more common- namely setting up a limited company to purchase BTL property through. In this article, I will explain why many investors

Why you should consider buying investment property through a limited company name

While it shouldn’t necessarily do so, increased tax regulations regarding Buy to Let property investment have deterred many prospective investors in recent times. One popular method to alleviate these is becoming more and more common- namely setting up a limited company to purchase BTL property through.

In this article, I will explain why many investors are choosing to set up limited companies exclusively to buy property through and the pros of doing so.

How do I set up my company?

Setting up a company might sound like a ton of hassle, but in reality, you’re only establishing it as a token gesture to save you money in the long-term. I’ll get to why that is, but firstly I wanted to explain the actual process of setting up a limited company.

You will need to register with Companies House and have at least one director and shareholder. You’ll need an official company address- many foreign investors simply use the address of their UK accountant or solicitor.

Forming the company couldn’t be easier. Providing you have taken care of the basic requirements for setting up a limited company for your property investmentit can be incorporated by using an online process or by postal application to Companies House. Most people use an online company formation agent: setting up a limited company to buy property in this way takes just a few hours.

Why would I buy property through a company?

If you own a property in your own name, the money you make from letting it out will be added to your other earnings i.e. from your job and taxed as income tax. But if you buy a property in a company name, the profits will be liable for Corporation Tax instead.

The rate of Corporation tax is around half of the higher rates of income tax, which means you can save huge amounts of money by investing in property this way.

Another great advantage is that mortgages are becoming more readily available on investments bought through companies. In the past, this wasn’t the case but with more and more investors taking this route, lenders are following in order to win their business.

You will still need to give a personal guarantee and your own finances will be scrutinised, so in many ways it’s a personal mortgage in all but name: think of the company as being a “tax wrapper”. So while you won’t find quite as many options and the rates and fees are likely to be higher, it’s less of a deal breaker than it once was.

Important questions to ask before making this decision

  1. How much money do you have?

As many lenders do not like to lend to limited companies, you might not be able to access the best rates and deals. But, buying through your company might be a good option if you have a large sum of money in savings, which you could put down on the property.

  1. What is the investment for?

If you are planning to give the property to your children when you pass away, purchasing through your limited company may be beneficial. There are ways to make Inheritance Tax savings by buying this way.

Children can become shareholders of your limited company. This would mean that when the property is sold the proceeds would be distributed between the shareholders. This would still be taxable but not at the same level as inheritance tax.

  1. How much income tax do you pay?

If you buy a property as a higher or additional rate tax payer, you will have to pay income tax at 40-45%. However, by putting it through your limited company, you will only be subject to pay corporation tax at 20%.

There are other options if you do not want to buy via your limited company. A lower earning spouse could put the property in to their name, only incurring income tax at 20%.

If buying a property through your limited company is something you have been considering, it is important to look at your long-term goals as an individual. As with any major financial decision, you should seek advice from an experienced adviser or company who will be able to analyse your situation and offer advice and guidance.

For more information on our latest investment opportunities, click on the Investments tab on our homepage. Alternatively, give us a call on 0208 445 6542 or email us at info@tarquinjones.com for more details.

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FAQ’s on off-plan property

FAQ’s on off-plan property

Off-plan property is highly sought after by many investors looking to buy into a major development and maximise their profits from the very beginning. The fact that many off-plan sites are located in capital growth hotspots mean that by the time your property is even built, you’ll likely already have made a profit. However, many

FAQ’s on off-plan property

Off-plan property is highly sought after by many investors looking to buy into a major development and maximise their profits from the very beginning. The fact that many off-plan sites are located in capital growth hotspots mean that by the time your property is even built, you’ll likely already have made a profit. However, many have some concerns about investing into property that is not yet complete.

In this article, we will analyse and answer some frequently asked questions regarding off-plan property investments.

What if the developers go bust before completion?

This is one of the most commonly asked objections relating to off-plan property and the truth is that it’s always a risk with any new build site. If the developer does indeed go bust, the investor normally will lose their deposit paid, although some developers so offer some insurance measures. The key thing to remember is to only buy off-plan property from trusted and established developers with proven track records. This should form part of your due diligence and research prior to investment.

What if my property falls in value?

Property prices can fluctuate in the short term; so as long as it doesn’t happen for longer and only in the area you’ve invested in. If this does happen, then you haven’t done your due diligence with your investment. Always invest in a location with good market fundamentals i.e. a strong economy, good regeneration levels, and quality infrastructure and transport links. This will make your property resilient to short term market falls and profit in the long term.

What if the property completion date is postponed?

Some investors have had bad experiences with their property’s being constantly delayed in terms of completion. Again, buying from trusted developers who have a history of finishing their projects on time greatly reduces this risk. Most developments have a long stop completion date on them where if a development isn’t finished by then, the developer will be in violation of contract. Employ a solicitor to run over the contract details on your behalf and they will make sure there are penalties should there be any unnecessary delays.

Aren’t new build sites more expensive?

Typically yes, new build property does come at a premium cost. In this case however, it is a case of getting what you pay for. New build sites are less likely to suffer from maintenance and repair issues than a second-hand property so the money you might save from investing in a run-down property may go straight back into keeping it operational. If you have a managing company in place for you on your property, they will take care of any said issues for you. It’s in theirs and the developer’s interests to make this right for you as they’re making money from this property too.

What happens if I can’t get a mortgage on an off-plan property?

Any mortgage broker can give a decision in principle meaning that, based on information given to them by the investor; they should be able to get a mortgage for when completion on their property arrives. Only in very rare conditions are these withdrawn, for example if the investor has lost their job or if the market conditions have drastically changed. Using a broker who knows what they are doing is important; they will know how to get the best mortgage with good interest rates that benefit the client.

Won’t I have to wait a while to start earning money?

Depending on how far off-plan your property is, you will have to wait until completion before you start earning rental income. While some view this as inconvenient in the short-term; in the long term you will profit hugely from the levels of capital growth you’re likely to see by the time your property is even complete. New build properties typically attract a better quality of tenant as well so it’s often worth waiting a few months down the line to earn more rental income than you would on a second-hand property.

Can you sell the property before completing?

Selling an off-plan site before it is built is known as flipping, and while some choose to do this in order to make a short-term profit, it is not a strategy we encourage. Flipping limits your buyers to only those with cash and not those with a mortgage, meaning a huge percentage of would be buyers are priced out.

The main reason why we don’t endorse this is just a difference in our ethos. We believe property investment is a long-term approach and with a short-term mind-set, the kind that flipping attracts; you are not going to profit from property in the same way. Stick to holding onto the site, earning rental income, and selling years down the line to capitalise on house price increases in the area you’ve bought in.

Buying off-plan can produce great profits from early investment in property, but it’s worth being aware of the risks stated and how to minimise them. Doing your due diligence and research is important is especially important in off-plan investment and placing trust in everyone involved i.e. solicitors, mortgage brokers, and developers is vital. Use those with the necessary experience and you will avoid many of the pitfalls associated with off-plan investment and go onto have many lucrative investments.

Get in touch with the Tarquin Jones team today to learn more about being a BTL property investor. For more information about our latest investment opportunities, click on the Investments tab on our homepage. Alternatively, give us a call on 0208 445 6542 or email us at info@tarquinjones.com for more details.

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