Many investors swear by buying property off-plan as opposed to waiting for the property to be developed, but why would that be the case? Surely, there is a certain amount of risk involved in purchasing something that currently only exists on a few pieces of architectural paper? Why do so many investors evangelise over off-plan?
This article aims to shed a little light on the subject of off-plan investments, and why they prove to be so beneficial to a great deal of property investors.
Forecasting is fundamental to success
The first thing we need to discuss is the importance of good forecasting when buying a property off-plan. Regardless of the other benefits – and there are many – without a good idea of what the local property market is doing in the area you wish to invest in you will be flying blind.
If, however, you do your homework and find that growth is expected in the short term, you can often find that by the time that the property has been built you will already be in profit.
This is why new developments up and down the country all have property boards up within the first couple of months of completion. Investors are offloading early. It’s not because people have purchased a brand new property and changed their mind within the first few weeks of living there!
While you can indeed buy off-plan and not sell, the importance of forecasting is about increasing profits. Why buy something off-plan if prices are set to dip in the near future? Be aware of your market.
More time to plan
A huge advantage of buying a property off-plan is the breathing space it gives you when it comes to planning how best to make your investment work for you. Buying an existing property means that everything needs to be in place right from the get-go.
Tenants need to be found almost immediately and the first contract you enter into may be a somewhat rushed affair. The pitfalls of this are obvious, and they are especially easy to fall into if you are new to the property investment game.
Greater control over the end product
As you are buying the property before the first brick has been laid you will, in most instances, have greater input into how the property looks when completed. You can make changes to the décor and add extras such as better quality fittings and white goods, all of which will help increase value and demand for your property when you come to rent or sell it in the future.
Get the pick of the plots
New developments, as with many existing estates and even streets, will have better areas than others. By opting to buy off-plan, you will be amongst the first to choose whereabouts you want your property to be rather than having to fight it out with everyone else when the building work is finished.
Things such as parking, access to shops and transport, and proximity to playgrounds and gardens all affect how prospective buyers and tenants will view your property, so buying off-plan can have real advantages in this regard.
Why isn’t everyone buying off-plan?
It’s a great question, as the advantages seem to point towards off-plan being a huge benefit to buyers. While this is certainly the case in many instances, investors should be aware that while buying off-plan is often beneficial it is not the easiest route for all to take.
The main reason for this is the banks reluctance to lend on off-plan properties. Why this should be the case is a question for the banks, but the fact remains that many lenders simply won’t offer you a mortgage or a loan for off-plan purchases.
This means that to take advantage of the advantages, as it were, you really do need to be a cash buyer in order to get in early and make the most of your investment opportunity. That being said, if you can stump up the cash, buying off-plan can be very favourable for those who are looking to put their money into the property market.
If you enjoyed this blog post then perhaps you would enjoy “A Guide to UK Property Investment for 2016“?
Feature image credit: Jeff Djevdet via Flickr.