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Investing Off-Plan

Learn from the Experts

Elena Rustici

Off-plan investing is defined as buying property from developers before the building is completed, sometimes well before the foundations are laid. It is a very strong tool for the property investor in times of growth, if well thought out and planned. This method of buying has been utilised by a large percentage of property investors over recent years to seriously increase their net worth through property investment.

The Benefits of Investing Off-Plan

Developers will often offer Assetz Property a genuine discount in return for bulk purchase of units in a development, particularly if it is early on. They do this as development finance is easier to obtain and cheaper if the development is partially or completely pre sold.

The lower off-plan prices provide the investor with a safety cushion of profit, and give them much higher returns on their investments, whether or not prices increase from start of build to completion. If prices do increase even just a little, then your profit will be substantially greater due to your geared investment.

Main Advantages

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The Risks of Investing Off-Plan

The benefits of off-plan investing, taking a long-term view, far outweigh the risks. However if you are taking a short-term view and intend to buy and sell very quickly then be careful and keep a close watch on the local prices in the area to minimise your risk. In poor or falling property markets off plan investing can be dangerous.

By committing to purchase a property well in advance of its completion you are minimising the outlay to take a stake in the future potential growth. However, if the property market falls over this period you are committed to purchase the property at a price that may be greater than the valuation at point of completion. In this case, whilst clearly financially costly, the solution would be to put down a larger deposit and stomach a short-term capital loss before prices recover.

If the property purchase has not exchanged then the investor can walk away from the transaction and in all likelihood would only have costs of reservation deposits and possibly some legal and mortgage costs. If the investor wishes to pull out after an exchange then they are at risk of being sued for damages for the loss of profit on the sale from the vendor, or being sued for specific performance to complete under the contract by the vendor.

There are also two main risks to be considered: the "build risk" and the "management risk". The issues revolving around the build risk are represented by the construction process, and whether the development will actually be built within the time frame given to investors and whether it will happen within budget constrains. The management risk, on the other hand, revolves around the speculation whereby the appointed management company will be able to manage both building and tenants within the agreed contract terms costs.

The Assetz Approach

Before introducing a new investment opportunity to our investors, Assetz Property carries out a detailed and careful due-diligence of all the sourced properties, which includes thorough checks on:

 

 

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Obtain genuine discounts or buy in property hot spots.

 

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Buy in a rising market ideally to further extend your equity and hence safety margin.

 

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Buy in good rental locations to ensure your mortgages are well covered to at least 130% at the new valuations.

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Buy in good rental locations to ensure rent shortfalls will not eat into your equity and reduce your portfolio growth ability.

 

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Carry out careful due-diligence before investing in any project.

 

 

 

Enquire on Off-plan Properties

 

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Risk Warning and Disclaimer:

The price of property can go down as well as up. Historic performance should not be taken as a guarantee of future performance. Geared property investment with mortgages can increase risk of losing money as well as increasing the possible gains. Mortgage products referred to in the website can be withdrawn by the lender or have rates or other terms changed without notice and reference to any products does not imply they are certain to be available in the future. Mortgages referred to may also have certain applicant restrictions and are for indicative purposes only although reasonable endeavours have been used to ensure that they are available at the time of publication and are applicable to a significant number of our purchasers. This site is for information purposes only and nothing on this site should be taken as definitive investment advice for your particular situation without you seeking additional guidance directly from ourselves or from other finance and property professionals. Property particulars on this site do not form part of an offer or contract. The developer and Assetz Property Ltd, whilst endeavouring to ensure complete accuracy in these property particulars, cannot accept liability for any errors. Valuations of property or indicated rents achievable are either estimated or derived from valuations and/or comparables and can change and should not be relied upon without your own additional valuation and research, but we have carried out reasonable endeavours to achieve accurate indications for these figures. All descriptions, dimensions, areas, reference to condition and, if necessary, permissions for use and occupation and their details, are given in good faith as provided by the developer and are believed to be correct. However, these are subject to change, especially, but not wholly, relating to any property that is off-plan or not yet complete. Any intending purchaser should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to their accuracy. The onus is on each individual investor to undertake their own due diligence, enquiries and inspections. Where shown, net yields are calculated as rental income less expected service charges less expected ground rent as a percentage of the property price. No void periods, optional letting agent costs, repairs or other costs are deducted. Our standard Terms and Conditions of Sale will apply. E. & O. E.