Last updated: 21st August 2019
Sure, you’ve heard that off-plan property investments are risky – dodgy developers, deposit snatching and unfinished developments, to name a few of the horror stories.
But like any investment, there are always risks – it’s how you limit them that matters. We’ve done a whole section of how we do our investment due diligence here and how you can apply this yourself.
Off-plan property can really catapult your output from property investment, and we’re going to tell you why.
Off-plan property is just that, it’s buying property off a plan. You’re committing to buying a property before it’s finished.
This term often refers to buying property before it’s started to be built, but even properties that are part-built or even right at the end of the build is still considered to be off-plan.
1. It’s cheaper
One of the reasons why this investment type is so appealing is the chance to bag a great and discounted property investment deal – a deal that’s below market value.
How? There are a fair few reasons why developers are keen to make sales and will offer incentives.
Usually it’s for cashflow reasons – developers might either want to kickstart the sales process by selling a number of units off-plan, or they might be at the tail end of the project and want to get off site to move onto the next. It’s all about timing.
The developer gets the sale, you get the discount. It’s win-win!
2. You can leverage
With off-plan property, you usually put down a 10% deposit and pay the rest on completion.
This is often where the magic happens if you’ve done your research.
For instance, if you put down that deposit and twelve months later the build is complete and the market has shifted 3%, you’ve made money without lifting a finger. There’s more on how to win big here.
3. It’s hands-off
This is massively attractive for hands-off investors. And by that, we mean investors that want to do as little work as possible.
Off-plan property is tenant-ready from day one – nice clean walls, new kitchens, bathrooms and other internal perks can make your life so much easier when putting your property onto the rental market.
And let’s face it, who doesn’t want an easier life?
Check the 18-year property cycle
Timing is everything. In a booming market, buying off-plan can be risky. But in a rising market, it can be pretty great – with big returns before you’ve even got the keys.
Educating yourself on the 18-year property cycle will give you the knowledge and confidence that you’re investing in off-plan property at the right time.
Are you protected when investing in off-plan property?
There’s plenty of ways you can de-risk off-plan investment property – although all investments have a degree of risk.
Look out for the NHBC (UK National House-Building Council) badge – if your developer is NHBC approved then this guarantees the build of the property for ten years after completion.
Even better, it protects your 10% deposit – so if the developer goes bust or there are any issues with the development not being finished, you’ll get your 10% deposit back.
It’s worth noting here that 10% is the maximum payout – which is the reason why you should only be putting 10% down when investing.
This investment strategy isn’t right for everyone – it depends on your goals, your target tenant market, your budget – the list goes on. If you’re not sure, click here to arrange a free goals call with our team.
But for those who it is right for, well…you know the benefits of off-plan property now.
If you want to learn more about off-plan property, you can watch the video or read about all the off-plan property tips we have on the education section of the website.
And if you’re ready to invest, you can speak to our Property Hub Invest team by clicking here.