What is the concept behind buying an off plan investment property?
With a surge in off plan investments, there is a minefield of information offering advice and tips about how to buy an off plan property ;offering valuable information when taking your first steps towards investing in the UK property market.
Property investment is big business, if done properly can become highly lucrative for any investor on any scale.
The strategy of buying off plan is simple.
It involves buying the property off plan at current prices from the developer or property investment off plan agents when the development is in the early stages. When the development is completed, a year or so later, the capital appreciation would have made it worth much more. The investor, at this stage, has the choice to enhance the property and either sell it or lease it out in order to gain a return.
Since the UK market is a strong one, the off plan investment market has recently seen profits of between 10-20 % been made from an initial deposit of 10% for the investors who took the leap!
With the highly- evolved UK property investment market showing signs of a steady rise, the domestic and overseas investor can expect high capital returns and even a guarantee for rental potential for an initial period, which serves as an unmistakable confidence indicator, in the potential for the development to yield steady and profitable rental returns for the investors.
Often at off plan development marketing launches, the opportunity for both individual investors and investment companies to buy either single units or multiple units would exist. The marketing strategy on behalf of the marketing agents would focus on selling to serious investors. The relevant off plan marketing materials, including the development brochure, would contain site plans, floor plans and details of the specifications. Also real life computer generated images would mirror what the development, both externally and internally, would look like at completion.
The draw-card for buying off plan is clear. The developers marketing strategy would be to incentivise off plan purchases to attract investors who would find it foolish to shy away from rock bottom prices, as the asking price would be priced significantly less than the true value at completion. The returns for the investor is maximised and so is the potential for growth, with the risks mitigated. Furthermore, the appeal for many investors is the opportunity to incorporate bespoke changes to the kitchen, bathroom or the flooring in the early stages of the build.
Moreover, the investor will be given an opportunity to assess the quality of the build and the units on offer by usually inspecting a show home. The show home is designed to be a typical property equipped with the level of specification the investor can expect from the investment. The earlier an investor gets access to the development on offer, the greater the chance of securing the better units and netting a discount. The investor’s negotiating position will be determined by the demand the development is attracting. The higher the demand, the less of a chance one will have of negotiating the price down.
Investor due diligence!
Property market reports from July 2013 show that investors prioritise three factors when choosing to invest in an off plan development:
It therefore stands to reason that an investor must do the research on the property investment fundamentals, like the proximity to shops, schools, transport links and employment, before signing on to any scheme, to ascertain the background information that would satisfy any doubts and answer all questions.
Balance snags with potential rewards!
The fears associated with buying off plan can be daunting for any first time investor. However, the conditional exchange of contracts legally obliges the developer to provide the investor with the property as represented in the marketing materials and in accordance with the plans specified, can and should, offer some reassurance for the investor.
Furthermore, the buy to let investor, will not see an immediate income as getting the property tenanted will depend on the completion date. However, for the hands off investor, who is seeking a self -funded retirement, this would not pose as a drawback.