While there are benefits of buying off-plan property as an investment property in the UK, the actual process of buying a new home can differ slightly from purchasing an existing property.
When you buy property off-plan in the UK, there are certain things you should be prepared to do and some things you should expect during the purchase process.
To help prepare you for your investment, here is some information on 10 of the most crucial steps to know when finding out how to buy off the plan property.
Keep reading for some essential information on buying property off-plan in the UK.
1. Make Sure You’re Ready to Buy Off Plan
Make sure you know everything there is to know about buying off-plan property before you begin your property purchase.
There are different questions you should ask yourself when buying property off-plan in the UK.
Are you prepared to wait for your property’s completion date?
Do you understand what an off-plan property is and the benefits of buying off-plan property?
Are you willing to accept a slight delay in the completion of your property?
And finally, are you happy to buy a property that you’re not able to take a complete physical tour of before you invest?
Think about your answers to these questions, and if you’re unsure about any of them, do some more research or speak to an expert before moving on.
2. Know Where You’re Investing
Do you know about the best areas in the UK to invest in off-plan property?
Understanding which cities and towns offer the best buy to let potential is paramount to your success as a property investor.
Knowing this is one of the best ways to fully reap the benefits of off-plan investment.
Research areas in the UK with high rental yields, low purchase prices, and strong property market growth.
Understanding the UK real estate market will help you know where to look when searching for your ideal investment and prepare you for any future purchases.
3. Explore Different Off Plan Property Types
Are you interested in buying a residential or student off-plan property?
When buying UK property off-plan, there are different property types to consider.
With off-plan investment in the UK, property investment opportunities vary between residential or student, and each comes with its own benefits.
Let’s explore student vs residential off-plan property investment and look at the benefits of each property type.
Student Off Plan Property
Student off-plan property is a common investment type due to the UK student market being so in-demand.
With so many university students in the UK, there’s a real need for suitable student accommodation, making this a great investment choice for 2021 and beyond.
That’s why many off-plan property developers are creating stylish student new build properties in key student cities around the country.
Here are the benefits of buying property off-plan in the UK tailored to students:
- Student off-plan properties are usually more affordable than residential homes.
- Rental income from student properties can be significant.
- Demand for student property is high, especially in top university cities like Liverpool and Manchester.
Residential Off Plan Property
Residential off-plan property is an off-plan property that’s open to any type of tenant, whether a young professional, a young family, or a retiree.
Due to the contemporary nature of new-build homes, young professionals are one of the most common tenant groups to rent off-plan properties in the UK.
The majority of residential off-plan homes are developed in city centre areas, which is appealing to a younger demographic.
The benefits of buying off-plan residential property are:
- New developments attract a lot of rental demand from people living and working in the city.
- Rental yields tend to be high for off-plan properties as they have high rental costs but below-market prices.
- Capital growth with residential off-plan property is high, especially in cities with strong predicted house price growth rates.
4. Look at Finance Options
When someone buys an investment property, using a buy-to-let mortgage may be their go-to method of paying for the investment.
Buying off-plan UK property with a buy-to-let mortgage is certainly possible, but there may be more obstacles for investors to cross to secure a mortgage offer.
When it comes to getting a mortgage for off-plan property, you will approach this as you would with a completed property purchase.
Speak to a mortgage advisor who will be able to connect you with mortgage brokers, and be sure to mention that you’re looking to buy off-plan property so that they can offer mortgage brokers that specialise in this field.
Some of the issues you could run into when you want to find a mortgage offer for an off-plan property include:
- Many mortgages are valid for only six months. If your off-plan property takes longer than this to complete, you could need to reapply for a mortgage.
- You could struggle to find a mortgage lender who specialises in or offers off-plan buy to let mortgages.
There are, however, some ways you could try and get around this.
Get a clear picture of how long your property will take until it’s completed by finding out its expected completion date.
This way, you can prepare your mortgage lender by letting them know when your property will likely be completed.
Another option for financing your off-plan property investment is to pay with a payment plan.
Many off-plan developers and property companies offer payment plans and allow investors to split the cost of an off-plan property into smaller, more manageable chunks.
This means that instead of buying a property with an off-plan mortgage, those who don’t have the entire property amount right away won’t need to pay everything until the property is completed.
Here’s an example of the payment structure for one of the off-plan properties sold at RWinvest.
- Reservation fee of £5,000 to reserve your unit.
- 35% of the property price upon exchange of contracts.
- 15% of the property price by a set date during construction.
- 50% upon completion (minus reservation deposit)
Depending on the length of time between reservation to completion, this option potentially leaves investors a lot of time to gather the funds to pay for their property in full.
The added benefit of paying for your off-plan investment with a payment plan is that you don’t have to worry about any buy to let mortgage repayments.
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5. Search for Your Ideal Property
Once you’ve decided where you want to invest, the type of off-plan property you wish to buy, and how you plan to pay for your investment, you need to look for your perfect property.
There are different ways to find off-plan properties available to buy.
You can browse listings on real estate agent websites like Zoopla, look at property developers in the local area and check out their current projects, or browse available properties with property investment companies like ourselves.
Property investment companies like RWinvest often specialise in off-plan property. They, therefore, have a wide range of attractive properties to choose from.
Browse listings, download info packs, and read up on every piece of information available for different off-plan property investment opportunities.
6. Request a Virtual Tour
Some investors are put off from buying property off-plan in the UK because they’re not able to take a tour of the finished property before they buy.
In recent years, however, companies have made the process of buying a property off-plan in the UK a lot more appealing with the help of virtual reality.
Virtual tours are now being offered to help property investors view an off-plan investment property before they buy.
Make sure you enquire about taking a virtual tour of your selected property to fully immerse yourself in the development with the help of VR technology and computer-generated imagery.
7. Do Your Due Diligence
Due diligence is the research that investors should do before making a large purchase.
Due diligence is vital for any property purchase, but particularly off-plan buy to let. You want to make sure you’re not putting money into something that might not even follow through.
The last thing all property investors want is to buy off-plan property and lose their money if the development doesn’t go ahead.
Here are three questions you should ask and things you should explore during the off-plan investment process.
- Does the developer have a good track record?
- Has finance been secured for the new development?
- Does the property developer have positive client reviews and/or testimonials?
Before making your off-plan purchase, make sure to tick thorough due diligence off your list.
8. Reserve a Unit
The process of buying off-plan property is very similar to the typical purchase process.
Here are some of the main steps you’ll take when buying off-plan.
- When buying an off-plan property, you’ll typically pay a reservation fee to ensure your selected unit isn’t sold to anybody else.
- Your solicitor will carry out all the legal aspects of making a property purchase, such as conducting checks and local searches.
- You’ll pay your deposit and exchange contracts.
- Once you’ve made your off-plan property investment, you should stay on top of the development process by checking for any construction updates.
- Once the property is complete, you’ll be served notice to complete on your purchase by a specific time. Once you pay the final amount, the property is yours.
So, once you’ve found an off-plan development you’re interested in and you’ve done your background research, this is the stage when you would reserve a unit for your investment.
Enquire about the best available units for your desired development, and pay a reservation fee to ensure nobody else buys it before you.
9. Organise Legal Support
Anyone who has ever invested in property before will tell you that one of the biggest top tips of buying an investment property is organizing good legal support.
A good solicitor will help you get from A to B and finalise your property purchase, so make sure you do your due diligence in finding one that’s right for you.
We partner with some of the best solicitors in the UK here at RWinvest. All of them are committed and experienced in dealing with off-plan purchases.
Using a solicitor who has experience working on the particular off-plan development you’re investing in is often a good idea, as they may be able to help get you to exchange more quickly and effectively.
10. Exchange Contracts and Complete Your Purchase
The last stage of your journey in buying off-plan property in the UK is to exchange contracts and complete your purchase.
This stage of buying off-plan means you’re officially buying your property, so it’s an important step.
The solicitor you appoint to help you with your investment will assist you with this, as will members of the team behind the development you’re investing in.
With RWinvest, once you’ve completed your off-plan property purchase, you’ll be passed over to our post-sales team who are available to answer any questions and keep you up to date with the construction of your property.