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Why You Should Buy Off-Plan Property As Your Next Investment
If you consider yourself clued up on the UK property investment market, chances are you will have heard of off plan property investments. Buying off-plan property means to purchase a property that’s not yet completed. This may seem like a confusing concept to some, but with a bit of investment research and understanding, it’s easy to see why off plan property investment in the UK is such an appealing option. Here is a guide to buying off-plan investments, with information on some of the benefits of investing in off-plan and reasons why you should consider adding this investment type to your property portfolio.
What is off-plan property investment?
Off-plan property investment is when an investor buys a property while it’s still in the planning or construction stages. Unlike other property types, investing in off-plan means that the buyer can only see how the property will look through computer-generated imagery and other technology.
What does off-plan property mean?
Off-plan property means that the property hasn’t yet been built. The investor who buys it is choosing to purchase the property ‘off the plan’ and signing a contract without taking a physical tour to see or inspect the finished outcome.
How does off-plan property work?
Off-plan property works differently to more traditional properties. Those interested in buying off-plan will get to see how a property will look with the help of computer-generated imagery. Some people are put off by being unable to see the property in person, but the benefits of buying apartments off the plan far outweigh any uncertainties.
How to buy off-plan property
To buy off-plan property, you first need to find the right property for you. Look online for developments based in your preferred location and priced within your budget. Then, find out whether you’ll be eligible for a buy to let mortgage or whether you’ll need to pay the upfront cost.
A lot of the time, it can be difficult to get a mortgage broker to find you a loan when buying off the plan for investments or residential homeownership. This is usually down to timing issues, with most mortgage agreements only being valid for six months. Therefore, if the development doesn’t complete by this time, the buyer will need to re-apply, which can be a time-consuming process. This is part of the reason why we require our investments to be paid in full rather than with a mortgage.
Once you find an off-plan property of ours that you’re interested in buying during your property search, we’ll provide you with all the details and information needed to make a decision. Although we can’t give you a physical tour of the finished property, we can provide you with a look at the planned outcome with the help of virtual reality. By using computer-generated imagery and VR technology, we can let potential investors see how off plan projects are expected to look upon completion, helping them make a more informed decision.
Why buy off-plan property?
So what are the advantages of buying off plan property? Buying off-plan property can be cheaper and can create better returns than other assets. Investment companies tend to offer off-plan properties at a lower price as a way to entice investors. This way, by the time the property is ready for tenancy, it’s likely to have significantly grown in value.
Better capital growth
Off-plan properties are considered one of the most effective investment options when it comes to capital growth. When you purchase an off-plan property in an area with a lot of potential for capital appreciation, the chances are that by the time your property is ready for tenancy, it could have significantly increased in value compared to the price before completion.
At RW Invest, all of our off-plan properties are located in UK buy to let property hotspots — Liverpool and Manchester. Both these two cities have seen huge house price growth over the years, with the north-west exceeding any other UK region. This property price growth isn’t set to slow down any time soon, with predictions for the north-west region to see a growth of 21.6 per cent over the next five years. If you buy off-plan property in Liverpool or Manchester, you increase your chances of making lucrative returns on your investment through capital growth — even more so than you would with a traditional investment.
Below market rates
So we know that off-plan investments allow you to make better gains on the value of your property, but what about price? Buying off-plan property in the UK is often cheaper than buying other investment types such as a refurbishment property. A lot of people that are just starting out in property investment will buy cheap properties off plan in UK cities as a trusted way to build their portfolio. We offer our off-plan developments at below market value rates for the lowest price, making the investments a lot more affordable while also maximising the potential for growth.
Our Bridgewater Wharf development, for instance, is located in a prime central Manchester location and includes luxury apartments priced from just £134,995. Within proximity to MediaCityUK, this development offers a choice of studios or one, two, or three bedroom apartments featuring luxury private balconies, communal garden areas, amazing river views and more. because of these fantastic amenities, Bridgewater Wharf is likely to attract the most sophisticated of tenants. Similarly, our One Baltic Square development can be purchased from £121,950. This off-plan development is based in Liverpool’s Baltic Triangle; an area voted the ‘coolest place to live’ by the Times. This makes One Baltic Square an excellent choice if you’re keen to buy off-plan property in Liverpool. Both of these off-plan developments have a high likelihood of increasing in value by the time construction is complete, and offer attractive rental yields of 6 and 7 per cent.
Consistent rental returns
Off-plan property investments tend to perform well in terms of attracting rental demand. The majority of tenants appreciate the idea of a new build home as they value being one of the first people to live in a property. Since new-build off-plan properties are completely modern, they also tend to not need any maintenance or repairs prior to tenancy. Investing in an off-plan gives you peace of mind that tenants will always be interested in renting your property, ensuring a consistent cash-flow of rental income and lower void periods.
One of the final benefits of buying off-plan property is the freedom that comes with this investment type. Because these properties haven’t been finalised, investors can pick and choose the best units. For instance, investors can research the different units available and consider whether the dimensions and specifications will be suitable for their investment goals.
Are there any risks of buying off-plan for investment?
Now that we’ve covered the advantages of buying off-plan, let’s look at the risks. Like with any venture, there are some risks that come with investing in off-plan properties. The main reason some people are put off by off-plan property is the fact that you don’t get to see the development before you make your purchase. This means that the property investor could end up disappointed in the outcome of your investment. There are, however, ways around this, such as using technology like VR and CGI to get a good insight into how the property is expected to look. One of the other risks of buying off-plan is that the development might not finish by the time it’s expected to. Be sure to stay up to date with construction updates to find out about the status of your investment and be more prepared for any delays.
Where to buy property off the plan
The best locations to buy off-plan property are cities and towns with a lot of capital growth potential. Off-plan properties have a reputation for increasing in value before they’re even ready for tenancy. If your off-plan property has been built in a buy to let property hotspot, the chances of this happening are even stronger.
For a long time, when it comes to buying and selling property, London property has held the spotlight for UK property investment. Now, however, the disappointing growth rates and low yields that come with property in London have meant that the attention has shifted to the North for off-plan property investments. Liverpool and Manchester are the two UK cities that present the best opportunities for capital growth. The north-west has the highest rate of house price growth compared to any other UK region, with predictions for even further growth over the next five years. Thanks to ongoing regeneration projects that are bringing lots of interest to these two cities and boosting the economy, investors who buy off plan Manchester or Liverpool property are likely to see their property grow in value by the time it’s ready for tenancy.
In Liverpool and Manchester, there’s a lot of demand for rental properties from young professional tenants, making off plan investment opportunities more promising. If you buy off-plan property in Manchester, you’ll want to make sure you appeal to this target tenant to attract as much demand as possible. Research suggests that millennials are a lot more likely to buy into products or services if they have an eco-friendly quality. Since new-builds are naturally more eco-friendly due to using less energy, investing in an off-plan property will appeal to the environmentally-conscious tenant.
Which off the plan property type should you choose?
When buying UK property off plan, there are different property types you should consider. With off-plan investment, UK rental properties vary between residential or student, so it’s a good idea to think about the possible tenants you want to attract as this will indicate the property type you choose. Here are some of the benefits to each off-plan property type to help you make your decision.
Residential off plan projects
Residential properties are one of the most popular options when investing in property off the plan. The type of people who rent a residential property such as a city centre apartment are typically young people and young professionals. As mentioned in regards to buying off plan property in Liverpool or Manchester, young professionals are an ideal tenant to rent an off plan project to as they’re likely to appeal to this demographic.
Aside from the eco-friendly aspect of new build properties, many young professionals will also favour this type of rental property due to the convenience that comes with it. If you lead a busy lifestyle, you’ll barely have time to decorate your home or stay on top of maintenance such as broken plumbing or structural issues. This is why off-plan developments are so perfect as they’re already well decorated and up to date, meaning young tenants can simply move in. Because of these busy lifestyles, young professional tenants also tend to avoid renting houses as they struggle to keep up with the housework and maintenance that comes with them, and instead favour a one or two-bedroom flat which is more compact.
Many landlords consider young professionals as the ideal tenant as they tend to take pride in their rental property. This means that they’re likely to stay on top of housework in order to keep the property clean and tidy, especially when friends and family come to visit. This is great when buying apartments off the plan as the tenants you secure are likely to be either the first or one of the first people to live there. Keeping the property in good shape will benefit you as it will ensure the off plan investment is just as attractive in years to come as it was after first being built.
Residential properties are highly in-demand, especially in prime locations surrounded by exciting regeneration and close to workplaces, transport links and top attractions. By buying off the plan for investment, you’re catering to this high-demand from young professionals and limiting your risk of void periods by bringing a new and exciting rental opportunity to your demographic.
Student off plan property investments
Some of the best off plan properties for sale in the UK are student properties. When wishing to buy cheap properties off plan, UK investors should look towards student accommodation which typically comes with a lower purchase price than residential. This is because the majority of new off-plan student properties are studio style, meaning that they’re smaller and more compact – and therefore cheaper. This doesn’t mean that rental yields have to suffer, however, as student properties in the UK can generate some impressive yields, provided they’re in the right location.
One of our latest off-plan investment properties, Poets Placein Liverpool, is a prime example of the potential behind off the plan student investments. This property is classed as both a student and residential development and comes with net rental returns of 8 per cent for two years. Along with the price and yields, there are some other benefits of buying off plan, such as high levels of demand.
Like young professional tenants, students are also likely to be drawn to off plan new build accommodation. In the past, more students would settle with shared student housing, often in a renovated period property. While some tenants love the charm of staying in an older home, these types of properties often encounter issues such as damp, faulty plumbing and electrics, or other structural issues. For students, these problems can be a major inconvenience, which is why living in a newer, more modern property is so appealing.
When you invest in an off-plan property in one of the UK’s top buy to let property hotspots, you’ll have even higher chances of a lucrative investment due to both demand and capital growth. Exploring student off-plan investment opportunities in top student cities like Liverpool will ensure you consistently secure tenants and have a high chance of making capital gains from your investment.
Find your next off plan investment with RW Invest
If you’ve enjoyed our off plan investment guide and you’re interested in investing in your first off-plan property or are maybe curious and want to find out more about our available off plan investments for sale, get in touch today. We have experience working with both UK based and overseas investors keen to explore the UK property market, along with a proven track record of due diligence and success. Our property experts are on hand to offer you advice about the best off-plan property for you, guiding you through each part of your real estate investment journey.