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HELP First time- new development off plan?


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Hi all

im looking at buying my first investment property in Liverpool. I’m unsure about my strategy- whether to buy a flat off plan in the city centre 

or just go for. 3 bed already built house a bit further out?

im looking for long term growth but a yield that will cover my costs with a bit of a profit. 
 

it seems that there are some financial benefit to buy off plan but given the covid situation I’m worried about completion dates/ if at all/ and it seems there are so many extra costs here and there that I feel it’s quite complicated...( ground rent, service charge, furniture pack etc)

what have your experiences been? And what would you recommend/ why?

thanks everyone!

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Think it'll come down to what your goals are for investing in property. Although they're both properties, you'll have slightly different tenant markets with a city centre flat vs. house further out. Each has its pros and cons and if you type in 'flats vs houses investment property' into Google, you'll see lots of discussions already.

My personal preference is a house as you can add your own value to it, whereas a new build you're already paying a premium to cover the costs of it being new, but also to cover their sales and marketing costs. There's also a myriad of new builds in Liverpool you'll be competing with in the city centre, whereas they're not really building new 3 bed terrace homes in comparison. The flat will provide less maintenance/hassle (as long as it's built properly and is cladding compliant), but then as you've mentioned you've got to deal with the lease, service charges, ground rent etc. 

For your goal of long-term growth, without knowing your personal finances/circumstances, I'd go with a nice 3 bed house in a decent Liverpool postcode, with good amenities (close to good schools, shops and transport into the city centre). 

 

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I am not seeing good outcomes for people buying off plan developments in oversaturated city centre areas.

As a first time, i wouldnt be recommending it at the moment! Heres a few reasons why:

  • Rental figures are plucked out of thin air. Theres no precedence and developers are likely to be overoptomistic
  • COVID is driving people to seek houses, with spare rooms and gardens. Nobody wants to work from home in a 2 bed flat
  • Students and postgrads are more likely to be working remotely, and there wont be the supply of new young professionals in the coming years
  • Surveyors are worried about oversaturation of BTL investors (these developments are almost always marketed directly to BTL investors)
  • Surveyors are worried about a fall in house prices and new build city centre stuff is often going to be sold at a premium
  • Many of the incentives offered (guaranteed rent schemes etc) are not accepted by lenders
  • Onerous ground rents (if they exceed £250 within the mortgage term, say 25 years), wont be accepted by any lender
  • Property sourcing firms hide the true oversaturation in this market because they sell them outside of places like Zoopla and Rightmove precisely for this reason.

Basically these deals look great on paper, but im finding many applications over the past 3 months have come back with some of the issues above from lenders and surveyors.

Well established housing in up and coming areas are going to be far easier to research, far more palatable to lenders and much safer overall. Not saying dont buy off plan, but its a minefield at the moment and not something id recommend for a first foray into investing...

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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46 minutes ago, DerekT said:

Think it'll come down to what your goals are for investing in property. Although they're both properties, you'll have slightly different tenant markets with a city centre flat vs. house further out. Each has its pros and cons and if you type in 'flats vs houses investment property' into Google, you'll see lots of discussions already.

My personal preference is a house as you can add your own value to it, whereas a new build you're already paying a premium to cover the costs of it being new, but also to cover their sales and marketing costs. There's also a myriad of new builds in Liverpool you'll be competing with in the city centre, whereas they're not really building new 3 bed terrace homes in comparison. The flat will provide less maintenance/hassle (as long as it's built properly and is cladding compliant), but then as you've mentioned you've got to deal with the lease, service charges, ground rent etc. 

For your goal of long-term growth, without knowing your personal finances/circumstances, I'd go with a nice 3 bed house in a decent Liverpool postcode, with good amenities (close to good schools, shops and transport into the city centre). 

 

Thank you so much for this! It sounds my instinct was right ☺️

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4 minutes ago, Stuart Phillips said:

I am not seeing good outcomes for people buying off plan developments in oversaturated city centre areas.

As a first time, i wouldnt be recommending it at the moment! Heres a few reasons why:

  • Rental figures are plucked out of thin air. Theres no precedence and developers are likely to be overoptomistic
  • COVID is driving people to seek houses, with spare rooms and gardens. Nobody wants to work from home in a 2 bed flat
  • Students and postgrads are more likely to be working remotely, and there wont be the supply of new young professionals in the coming years
  • Surveyors are worried about oversaturation of BTL investors (these developments are almost always marketed directly to BTL investors)
  • Surveyors are worried about a fall in house prices and new build city centre stuff is often going to be sold at a premium
  • Many of the incentives offered (guaranteed rent schemes etc) are not accepted by lenders
  • Onerous ground rents (if they exceed £250 within the mortgage term, say 25 years), wont be accepted by any lender
  • Property sourcing firms hide the true oversaturation in this market because they sell them outside of places like Zoopla and Rightmove precisely for this reason.

Basically these deals look great on paper, but im finding many applications over the past 3 months have come back with some of the issues above from lenders and surveyors.

Well established housing in up and coming areas are going to be far easier to research, far more palatable to lenders and much safer overall. Not saying dont buy off plan, but its a minefield at the moment and not something id recommend for a first foray into investing...

Yes it seems too good to be true sometimes 

really appreciate these insights. Will look for a house as my original plan!

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