Off-plan property is now the most popular way for investors to purchase their investment properties. Buying off-plan simply means exchanging contracts on a property which is not yet complete. With new taxation legislation such as increased stamp duty and mortgage relief changes coming into play, this is putting some strain on landlords’ profits. Securing a prime property at a discount is more important than ever and the easiest way to achieve this is to buy a property before it is completed.
Buying off-plan has many benefits. As previously mentioned, you are able to gain access to a discounted rate when buying before construction is completed. Many developers will offer pre-construction prices when a project first comes to market. These prices are even lower than the off-plan price offered and therefore allows investors to achieve an even greater discount, further adding to the property’s future yield. By purchasing as early in the build process as possible, investors are able to take advantage of maximum capital growth potential, meaning they will see a strong uplift in value by the time the property is completed. This is a key strategy for any potential investor and is vital for maximising your investment.
Purchasing at this early stage also ensures you are gaining access to the widest possible range of available units in a development. Doing research on your chosen investment location should guide your choice in terms of the number of bedrooms, aspect and future saleability when you look to exit your investment. Buying a property currently under construction means your development is going to have the most up to date amenities and facilities, these are the features that are going to attract potential tenants. With the wide range of choices available in today’s rental market, standards are being pushed so it is fundamental to ensure that you are buying in a development which is an attractive proposition to the rental market.
Whilst it is clear to see the benefits of purchasing an off-plan property, this does not mean that careful due diligence and research is not required. Location is always a crucial factor to consider when purchasing your property and the first step is choosing the city in which you want to invest. In recent years the North West has been the key focus for experienced buy-to-let investors. Not only do rental yields here far outstrip London and the South East, entry prices are also lower. Most significantly for off-plan investors, the potential for capital growth is far stronger in the North West region’s major cities such as Manchester and Liverpool than it is in the capital. For the period 2018-2022, JLL expects these cities to have experienced 22.8% and 18% growth in property values respectively.
Once you have decided upon the city in which you want to invest, the next stage is to identify which development you wish to buy in and again that decision should be driven by location. The majority of your potential tenants are going to be young professionals and international students, so consider this factor when choosing your development. You need to ensure that the development is located near the city’s employment districts and universities, whilst also being well served by major transport links, all factors which will make your property attractive to your potential tenant base.
Once all of the above has been considered, the next step is to go about finding a property and setting the wheels in motion to begin the purchase process. The process is very straightforward once you understand how everything works and our step by step guide takes you through an off-plan property purchase from start to finish.
- Speak to an agent – They will advise based on your requirements and criteria or you may already have decided.
- Reserve your property – Once you have chosen a specific unit, you will need to pay a reservation deposit to remove this property from the market. Reservation deposits typically range from £2,500 to £5,000 which will form part of your exchange deposit.
- Instruct solicitors – Most developers will require you to work towards a 28 day exchange period. Once you have chosen your solicitor, they will begin working through the paperwork to ensure everything is correct. All good agents will have an after-sales team who will guide you through this process.
- Exchange – Once your solicitor is satisfied with all the documentation, they will inform you that you are ready to exchange on your property. At this stage, you will transfer the exchange deposit minus your reservation deposit to your solicitor. They will then exchange contracts and funds and you are now the legal owner of the property.
- Completion – Once the property reaches the stage of practical completion, your solicitor will inform you that you are now required to settle the remaining balance owed for the property. This will either be via a mortgage or with liquid funds.