How to make sure you are never nervous when you invest off-plan
Buying off-plan property is an investment strategy packed with benefits. You could get the biggest discount on the best off-plan property. Your maintenance bills should be next to nothing. You should be able to command a premium rent, too. You secure the investment with a small deposit, and then pay the balance over a long period. During this intervening period, your off-plan investment could produce a very attractive capital gain.
But is buying off-plan too risky? After all, you’re buying a property that hasn’t been built. You’re relying on the developer delivering what they say they will. What if property prices fall before you complete?
In this article, you’ll learn the single investment strategy that has helped my peace of mind in every off-plan investment I’ve ever made. It’s a strategy that I advise all property investors should make integral to their investment planning.
Make sure you buy from the best developer in the best location
Before I discuss the strategy that should guarantee your peace of mind, let’s look at the very basics. You want to buy in a great location. That’s a given and is no different from investing in other types of property. You want to invest where all the property fundamentals line up, like ducks in a row: shops, schools, transport links, major employers and major investment.
So, you’ve done your property investment research, and identified the best places to invest in property UK. Next, find the perfect development being built by a reputable developer. Most developers need off-plan investors to help fund the project. Further traditional funding becomes available when the developer pre-sells units ahead of them being built.
There will always be bad developers. Your objective is to avoid these and only buy from developers with a good track record. Here at Gladfish, we only work with developers who have proved they deliver the goods, and on time.
Great location + great developer + great property = great benefits
When you think about off-plan property investment at the basic level, it is an easy concept. You buy a great property, in a great location, from a great developer. Get these three things right, and you should reap maximum rewards, including:
- Capital growth while the property is being built
- The time to ensure you have all the financing in place
- The ability to let it for a premium rent once the property is completed (people love new builds)
You still have those niggling doubts. It’s still a big investment:
What if the deposit isn’t protected properly? A good solicitor will ensure that your deposit is protected if the development isn’t completed, or isn’t completed on time.
And when it comes to completion, what happens if you can’t obtain a buy-to-let mortgage? You may have lost your job, or moved abroad, or started a new business. If you use the services of an experienced buy-to-let mortgage broker, your risks here will be drastically reduced. There isn’t a situation they haven’t seen and dealt with.
And what if the property doesn’t rent out as fast as you had planned? Markets change, don’t they? Perhaps the location won’t be as sought-after by renters when you complete.
Despite buying in the best location and from the best developer, you still have those niggling doubts.
Nix the negative feelings with a contingency fund
As part of your strategy to reduce the risks associated with the off-plan investment, make sure you have the funds available to cope with unforeseen circumstances. Property valuations can vary. Market conditions change.
There may be a temporary shortfall between valuation and financing needs as the market takes a breather before getting back on track through the property and economic trend cycle. Investors who are prepared for this won’t have regrets in the future.
How big should your contingency fund be? I recommend that around 5% of the purchase price should be more than ample. It will give you the peace of mind that will help you sleep easy, and should ensure that temporary blips are taken in your stride.
For more information about buying off-plan property, and how to maximise the rewards while minimising the risks, contact one of the Gladfish team today on +44 (0)207 923 6100. We’ll discuss your needs, desires, and financial objectives, and help you develop a unique and personalised strategy to reap all the rewards of property investment.
Live with passion
Brett Alegre-Wood
