The secret to buying off-plan property to maximise profits

How to buy the best off-plan units at the best price

Off-plan property investment has the potential to produce incredible capital gains and rental income when you do it right. In strong markets, I’ve made ‘overnight’ gains of 20% and more. I’ve put the word ‘overnight’ in speech marks because an off-plan property can take one or two years to complete. You put down an initial deposit of around 10%, with staged payments through to completion.

Some contracts allow you to sell the off-plan property before you make the final payment. If you’ve put a deposit of 10% on the off-plan investment property and the property value rises by, say, 20% before completion, you’ll have made double your deposit. If know how to make money when investing in off-plan properties, then similar profits will be within your reach. The best profits are made when you buy off-plan at the best time.

In this article, you’ll learn how developers sell the off-plan property. This knowledge should help you time your entry into off-plan property for maximum profits. Why is this important? Because the best profits are made when you buy off-plan at the best time, and while you don’t have any control over the timing of market booms and busts, you do have complete control over when you invest.

An off-plan property launch is never the beginning

The first hint of an off-plan investment opportunity that uneducated investors get is when off-plan sales are launched to the public. At this stage, it’s often sales agents or estate agents that create a big fanfare. They’ll advertise in local (and possibly even national) press ahead of a launch event. The launch event might include open days, seminars, and champagne. There will be glossy brochures produced, and on-site agents will be falling over themselves to walk you around the show home.

To the uninitiated, this launch is the first opportunity they’ll have had to invest in the development. However, it’s probable that all the best units have already been snapped up. Visitors to the launch will think that this is an indication of the strong demand for property in the development. It is true, but not in the way that the beginner or home buyer believes. You see, before the launch, and before the local estate agents have been given the opportunity to market the off-plan and new build properties, there will already have been a lot of buying activity.

Off plan property launches – the prequel

I don’t know about you, but when I go and watch a movie at the cinema and then the studio release a prequel I feel kind of cheated. It’s like there has been a whole story that was kept secret from me. The off-plan property market works in a similar way.

If you visit a new development site at the time of the launch and discover the best units have been snapped up fast, that’s because the prequel to the launch has already taken place. There were investors ahead of you who were let in on the secret sales before the main event. They took the best plots and got the best deals already. These off-plan sales were made off-market.

Who gets access to off-market investment opportunities?

When a developer receives permission to build, it needs to finance the development to get started. It can either go to a bank, which usually wants to see concrete proof of the ability for the developer to pay back any loans. Banks are not very entrepreneurial when it comes to lending money – how does the saying go? “You can borrow money easily when you don’t need it”. With no more than a few acres of land and some drawings to view, banks and traditional lenders are hesitant to put up the cash the developer needs to get started.

Investors, on the other hand, are willing to accept some risk, providing the potential rewards are worth it. So, behind the scenes, and before the official launch, the developer often sells the off-plan property to investment companies. This does two jobs:

  • First, it provides the developer with the funds to get the ball rolling and start building.
  • Second, the developer now has concrete sales to show the bank. It can now negotiate better rates, and the bank will be more willing to lend with the knowledge that there is demand for the properties proposed.

What’s in it for off-market buyers?

Of course, for the investment company to buy properties that are not yet built on a development that may not even have had its ground broken, there has to be more than a great vision. The incentive for the investor is always the potential profit available. The higher the potential profit, the more likely the investor is to put his money on the table.

Investment companies who buy pre-launch are offered incentives to invest and buy the developer’s early-stage off-plan properties:

  • Discounts to market value
  • The pick of the best units in the development

As the development progresses, the developer becomes less inclined to discount prices and investors will be buying units with the lower resale appeal (perhaps, for example, because of location on the development site – an apartment overlooking green fields is more appealing than one overlooking a maintenance yard).

How to get the best off-plan units at the best price

The secret strategy for maximising off-plan property profits is to invest as early as possible. The earlier you invest in off-plan property, the more likely it is that you can negotiate a better discount and buy the best unit. The thing is, developers tend not to sell these off-market units to individual buyers. It’s expensive for them to do so, as well as being time-consuming. Instead, they sell clusters of off-plan units to investment companies (like Gladfish).

Here at Gladfish, we choose only to work with the best developers in the best locations. Our investor clients benefit from having early off-market access to some of today’s best property investment opportunities, in some of the best places to invest across the UK. Better still, they benefit from the discounts we’ve negotiated on the best units.

If you’d like to know more, or want to find out about our latest off-plan property opportunities, contact one of our team today on +44 (0)207 923 6100.

Live with passion

Brett Alegre-Wood

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