5 simple steps to guarantee profitable off-plan investment
Off-plan property investment could be your ticket to an early retirement. An off-plan property could be the best investment for property investors with the benefits it offers. For example, when you buy early off-plan, you:
- Lock in a discount to market value
- Get the best property choice (the earlier you buy, the better the choice)
- Take advantage of the time benefit of staged payments
- Get the fixtures and fittings that you want
- Benefit from a new property that rents and sells faster
Once the off-plan property is completed, and in your investment portfolio, you’ll start to benefit from the dynamics of the UK property market:
- Demand that outstrips supply
- Long-term property price rises
- Rents that increase annually to give you a higher income
- And lock in the interest rate with a great fixed rate buy-to-let mortgage, and the biggest part of your costs won’t rise year-on-year
When you do it right, off-plan property investment is a great way for busy professionals like you to build an investment portfolio that will power you towards a wealthy retirement. However, like all investment strategies, there is a way to invest well and a way to invest poorly. Here we discuss the five-step strategy that should guarantee your cash works hardest for you, with the minimum amount of time and effort required.
Step 1: The best investors forget about tax breaks and other benefits
When you visit a financial advisor, one of the first things they’ll ask is how you feel about tax. They’ll show you whizzy strategies to reduce your tax. They’ll talk about ISAs and pensions, and other tax-efficient investment wrappers.
It is all good, but remember why you’re making an investment. When you buy property as an investment, concentrate on its ability to create capital growth and rental income. Only when you’ve found the best opportunity for investment return should you start to think about tax.
Oh, and by the way, it is possible to invest in property in a tax-efficient pension plan – if you want to know how to do this, contact us. We’ll walk you through how to structure your off-plan property investment for maximum tax benefits on top of all its other advantages.
Step 2: Stick to our budget and maintain a reserve fund
Never overstretch your finances. Work out what you can afford, be conservative with your cash flow projections, and maintain a reserve fund to ensure you’re covered for events like a void period or an unexpected maintenance bill.
Step 3: Plan to hold your property medium to long term
Property investment is a long-term game. The biggest losses are nearly always incurred by investors whose strategy is to buy and sell quickly (flipping). If the market is going up, then a flipping strategy can make great profits. But if it takes a temporary dip, you could lose your shirt.
So invest in a five or, even better, ten-year plus view. Over the last five decades, UK property prices have roughly doubled every eight to ten years. In among those periods, though, we’ve seen some turbulent times. If property prices do take a dip, you’ll still benefit from rental income as you wait for the market to recover. If you’ve invested well, any price pullback is likely to be constrained and short-lived; and a market downturn could be the opportunity for you to buy more off-plan property at an exceptional value.
Step 4: Don’t jump right in – do your research
Don’t be rushed to invest. Make sure that the property fundamentals – shops, schools, transport links, major employers and major investment – all add up. Investigate the area in which you’re buying, and find out average void periods, rental prices, capital growth rates, and so on. Get to know the local economy, and make sure that there will be jobs available to support rental demand.
These are all areas our property research covers (and why our Hotspots Algorithm, which analyses 108 data points across 324 UK districts, is so successful in picking the best locations for investment).
Step 5: Put your property under management and review annually
You don’t invest to add another job to your busy life. Hire investment property managers to do all the day-to-day donkey work of being a landlord. Reap the rewards of your research, and review your property portfolio performance once a year.
If your property has increased in value, you could use a remortgage strategy to build your investment property wealth. Each new off-plan property investment could bring your financial goals a step closer.
What are you waiting for?
It’s tough to make time when you’re a busy person. But the longer you leave investment decisions, the longer it will be before you get to really enjoy the fruits of your labour. If ever.
Contact one of our team today on +44 207 923 6100. We’ll help you discover whether off-plan property investment is right for you. You’ll also discover how you can invest and keep what little spare time you have free. And we’ll explain the strategy to invest in off-plan property tax efficiently, as you look forward to increasing income in retirement.
Live with passion
Brett Alegre-Wood
