Off-plan property investment: is it worth considering?

Investors looking to get a head start on a development project should be aware of buying off-plan. Off-plan property investment involves buying a property while it is still in the planning or construction phase, usually made up of a showroom, computer-generated imagery, or other technology. Although purchasing a property before it has even been built sounds risky, several benefits come with it that may outweigh any negatives.

Before understanding any pros, the cons need to be addressed first. The main one to note is the developer – how well the investor actually knows them will determine everything. How many developments have they completed? What are their building standards? How well are they faring financially? By doing the research, the investor can paint a better picture of how the development will go. If they do not do the research, they could end up in danger.

For example, property firm Grosvenor Property Developers duped investors out of £7.7m between February 2017 and January 2018. The company did not complete the works they were contracted to do after selling student accommodation off-plan in Bristol. With more research put into this company, the investors may have uncovered their true intentions. Investigators found that planning permission was never applied for, and Grosvenor Property Developers never acquired titles to the property in the first place.

Another con includes property values falling, which, in turn, could affect lending on the property leading to higher deposits. Ensuring the property has a guarantee is crucial and must be included within the contract. This factor could protect investors from defects that may occur.

Growth in value

If purchasing off-plan, investors could see a profit by the time the building is completed. Off-plan properties are typically bought at lower prices before completion since there is nothing concrete at the start of the project – it is essentially just a concept or vision. The long-term goal should appeal to the investor; it should not be seen as a way of making a ‘quick buck’.

Recent figures show a shortfall in the number of new builds compared to the growing demand for homes. Prompting demand for high spec off-plan developments suggests a more even spread across the UK, with regional markets seen as ‘prime beneficiaries’. Four in five new-build flats were sold off-plan in the North East, while the North West saw a figure of 68%.

Off-plan developments are growing in popularity, and it is clear to see why due to the potential profits, they are set to make investors in the future. Looking at it long-term, these off-plan options can be good investments following a year in which many people have indeed experienced losses.

Control in the hands of the investors

Off-plan properties also benefit from the freedom of investors choosing their own unit. Once the location and developer have been sorted, a specific site, features, rooms, and other aspects may be hand-picked by the investors. Fixtures and fittings can also be part of the package, making the process hassle-free as a result.

This can be used to the investor’s advantage to target a specific market, such as first-time buyers, with features that appeal to them. Working with the developers on what would be best for the property can then put those features into reality.

New build aspects

Since off-plan developments are new or refurbished, they can benefit from incorporating modern elements such as new and emerging technologies, energy efficiency, and other features that are not generally available for older buildings. Tenants will prosper from receiving cheaper bills and potentially higher rental prices going forward – aspects that cannot be ignored by either the tenant or the investor.

Off-plan properties, like all properties, come with their downsides, as has been mentioned with the earlier cons. By going at it with the right amount of research, due diligence, and planning, investors can find success and come out of the other end in a better place.

Off-plan property developments are not the only way to invest in property in a more hands-off way. Read our blogs on how you can invest in real estate and receive a passive income from your investment.

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