Property Investment / Investment Property
Buying a property before a single brick has been laid may sound like a risky business but in recent years the investment property route has become hugely popular with property investors keen to get ahead of the game.
Often these buildings are little more than a muddy hole in the ground. There's a hoarding around the site, an agent's number to call, maybe a marketing suite, and lots of nice CGI images and plans to look at.
It's not for the faint-hearted, but that doesn't seem to deter people. Generally the demand for investment properties is high, we as our company name suggests deal in investment property quite often, with customers asking to be put onto our area specific waiting lists.
We do however receive similar questions when people contact us enquiring about specific property investment sites.
- How does the system work?
- What are the benefits and risks?
- What issues should you consider before you commit to a investment property with a completion date that could be two years down the line?
This is why we took the decision to create this short guide on property investment and the advantages it holds for property investors.
Why Do Property Invesment? - The Pros
By buying a investment property today you are securing the price of that property at today’s prices. By the time the property is completed it may very well have risen in value thus making you a significant return on your investment immediately. Furthermore, if you can ‘just’ afford to buy at today’s prices know that if you wait until more completed properties come on sale you may have missed the boat and have been priced out of the market.
- In a strong market you can make a healthy percentage profit off an initial minimal initial deposit.
- You buy new-build so no maintenance. New-build property also comes with warranties.
- Bigger developments in up and coming areas are often the best buys available, particularly if you are looking to invest for buy to let purposes.
Investment Property - The Cons
- If rates rise or rents fall during the build you will pay the price -with long lead-ins this can be a real problem.
- Even if prices do rise over the build period, there's no guarantee that it will be easy to sell on the property at completion ('flipping'). If there are lots of investors in the same development it can be difficult.
- The market changes and it proves more difficult to let than you imagined.
Whatever your objectives, the whole business is something of a gamble. So careful research is essential to help minimise the risks - and maximise the gains.
The Off Plan Property Investments Promise
Off Plan Property Investments offers you this guidance and advises you to do your research weighing up the costs and potential problems you could face in buying an investment property, however the previously mentioned cons are never an issue with Off Plan Property Investments as we cover you for just these eventualities. Our investment properties are on a fixed price basis so you will never have to pay out any more than your original reservation fee. We are able to make this possible by doing our own in depth research using our vast knowledge of the property market and more specifically investment property. Look through our site for our current investment property details.
When Does It Begin? Access Your Investment
Officially, property investment marketing begins when the developer releases the development. There's a launch date, maybe a big event to raise the curtain on the scheme, and a certain number of investment properties up for grabs.
At this point in the process Off Plan Property Investments will have sent out our own team to run various checks and comparable reports. The information that they generate gives us an overview of the property investment potential that each investment property holds. Once we have a site on our books we will then put together marketing material and send it out to potential property investors within our database.
As a general investment rule it is better to get in early with investment property. In the beginning stages it is easier to secure a prime plot, which from an investor’s point of view can prove to be a major benefit.
If you try to buy in at a later stage things tend to be more expensive. Mainly in an attempt to recoup money he will put the asking price up, but he will still be willing to negotiate on the price, the deposit and additional features such as parking spaces.
Do The Numbers Stack Up?
If you're buying as an investor - and most property investment sales are to investors - the first thing you'll need to consider is whether the numbers stack up. Is the price right, and what is the rental potential?
To answer these questions, you'll need to research the market carefully.
- Check the sale prices in other new-build developments in the area. And check rental prices too
- Developers give their own estimates, but these are usually on the optimistic side.
Ultimately, of course, the loan you get will depend on what the mortgage company thinks the property is worth (Loan to value), so instruct a surveyor on your lender's panel.
The surveyor will assess the value and the rental potential - this can sometimes be different from the developer's so it's a vital stage to go through before you exchange contracts.
Off Plan Property Investments takes all this pressure off of you as an investor by providing the research for you to browse through before you make a decision.
Should You Buy Investment Property?
Some questions you'll need to answer before you buy:
- Price: Is the property properly priced? Go on current prices in the market and if it looks over the odds, reassess the situation.
- Yield: What rental yield will it deliver? You need to make sure the investment property covers your mortgage/loan.
- Area: Is the area on the rise? - ie: new infrastructure or regeneration plans, which will boost values?
- Supply: What's the supply situation like? - if there are lots of new-build investment properties going up the market may be saturated come completion time.
- Property Investors: How many investors are buying in the development? - too many will mean more competition for tenants.
- Rental Demand: What's the rental demand like? Is this an area your target tenants will want to live in? Is the infrastructure in place? Is the rental market high?
- The Developer: Is the developer well-established? What's their other work like? Are they NHBC registered.
The Property
Buying investment property demands a degree of imagination, you will need to be able to visualize the layout of the development, of the block, and of the property.
It also demands a healthy degree of skepticism because developers will put on a big PR show with models, mock-ups, CGI images, glossy brochures, and flashy launch parties.
Drink the wine and nibble the canapés, by all means, but ignore the hype and keep a cool head. With the property, think about:
- Layout: The layout of the development and where the property will be - is it in a secluded part or a busy section? Visit the site if you can. This can be easily arranged if you decide to invest through Off Plan Property Investments.
- Aspect: Where is the property in the building - does it overlook train lines or a thundering road? Does it have a lovely view? Does it get good natural light?
- Services charges: Service charges can eat into yields so it's important to know what they will be and what you get for them. Off Plan Investments make every attempt to cover these charges when we research the specific area.
- Specifications: Are they what you want and will they be appealing to your target tenants?
- Extras: Bargain for all your worth to get the best deal - whether that means a parking space thrown in or stamp duty paid.
- Rental Guarantees: There's no such thing as a free lunch - the cost of rental guarantees is often included in the asking price.
The Property Investment Process
The basic process can be broken down into these 9 steps.
- Find a Property: You find a suitable development and think it looks like an interesting property investment.
- Talk To A Lender: Get a decision in principle from a mortgage lender. Our panel of brokers will be quite happy to give you advice on the best course of action.
- Reserve a Plot: View the plans, visit the site, review the figures and pay a £1,000 reservation fee.
- Surveyor Instructed: Property investment mortgages are based on the surveyors' valuations, so instruct a surveyor recommended by your lender. The surveyor will also consider rental values. Off Plan Investments have area specific valuers who can provide a true valuation of the property to put forward to solicitors.
- Mortgage: Have a mortgage offer in place before you exchange contracts. Don't complete without it or you could discover the loan your lender will offer won't cover the cost of the property.
- Exchange & Deposit: You exchange legal contracts within 3-4 weeks; on exchange you must pay a 5-10 per cent (minus reservation fee). If you fail to complete, you lose the deposit.
- Completion Dates: There are usually two, a short stop and long stop date. The development can't be completed before the first or after the last (usually a generous time frame). Remember - there is no definite completion date.
- Snagging: You get a couple of weeks' warning before the final completion date. This gives you time to check the property - you can employ a professional snagging company or do it yourself. Off Plan Investments offer this as part of our tailored service.
- Completion: Your solicitor transfers funds from lender - stamp duty is also due at this point. This will all be taken care of by carefully selected client solicitors.
The Voice Of Experience
As a company Off Plan Property Investments has been working with investment property for 9 years. So we know that sometimes property investment sounds to good to be true and people are fairly quick to jump at the chance to be a property investor for relatively minimal investment. So we offer some sound advice to keep you out of trouble.
A lot of people make rash decisions when it comes to investing money in property, the best inside information we can offer is to research the area and other off plan sites in the vicinity. Alternatively you can let us do the hard work for you.
Every site we deal with has already been thoroughly vetted and checked to ensure that you the customer will receive the best possible deal, this includes rental yields, typical mortgage payment on a property investment mortgage, the degree of client discount available after costs and finally the price you will pay.
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