Is off-plan property right for you? Key considerations
Off-plan property is an exciting opportunity for investors which comes with many distinctions from what might be considered a “traditional” investment opportunity. When done right, it can be a reliable and profitable option that is popular with investors from around the world.
If you’re thinking of investing off-plan and wondering whether it is right for you, here are some key factors to consider.
Are you willing to wait for the property?
Buying off-plan property means that you are purchasing before it is completed. This can be done from the planning stage onwards. This is in contrast to buying a completed property which can begin generating rental income immediately.
However, this is not necessarily a downside of off-plan property. Investing in this way means that you are likely to be paying a below-market rate, and in addition you will begin generating capital appreciation immediately. Even though the property is not complete, its value will still rise if you buy in the right market.
When completion approaches, you can agree a rental lease with a tenant so that your rental income begins the day of completion.
Escape the mortgage rate trap
A related benefit is that you will not pay the balance of an off-plan purchase until it is complete. This means that today’s relatively high mortgage rates will not apply to you. Instead, you can benefit from the anticipated lower mortgage rates in the future when the property completes.
If you are buying a completed, operational property then you will in effect be paying another premium on top of the market rate. Neither applied to off-plan investments and so you will gain in two ways by choosing this type of purchase and avoiding the mortgage trap.
Getting the location right is vital for any property investment, whether you are buying a completed property or purchasing off-plan. The main difference is that with the latter, you need to look ahead and see where the market is going to a greater degree.
This sounds like more of a gamble than it is. For example, you can be confident that cities such as Manchester will continue to perform extremely well thanks to the huge gap between supply and demand. There are not enough properties in construction to meet that demand so investing in city centre luxury developments like Vision is likely to be a profitable choice.
Likewise, choosing a growing market such as Preston can be a good strategy with benefits multiplied by investing off-plan. Not only will you have a premium property in a growing new market at the exact right time, you will also have been able to buy it at a much cheaper price with the potential for even greater capital appreciation.
Research the developer
The number one way to mitigate some of the risks of purchasing a property yet to be completed is to do your research on the developer and sales agent. All reputable developers will be happy to show off their track records of completed developments, talk you through potential delays, provide construction updates and take your round show apartments when they are ready.
Transparency is the key and you should have no trouble finding testimonials from previous clients and information about previous developments. If you find a developer you can trust and build a relationship with, off-plan investment becomes a much clearer and more reliable prospect.
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