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:
- 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.
- 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 email@example.com for more details.