Investing Off Plan

The resurgence of new build properties being developed in

London has vastly increased in the past 6 years, proving popular

amongst foreign investors and buy to let investors.

 

Director Peter To shares his investment check list when buying a

new home off-plan, and reveals why carrying out your due

diligence is extremely important when purchasing a property

that is yet to be built.

Investing in Off Plan Properties and New Build Homes
Investing in Off Plan Properties and New Build Homes

Off Plan Investments

Buying off plan

Off plan means to purchase a property from a developer before it is complete.

I have done this quite successfully in recent years, purchasing over 6 flats and 2

houses in the last 8 months.

 

The investor often gets a discount and chance to benefit from capital growth as the

property is built. For the developer, it is a means to finance the development. It’s a

win-win situation! The following points are essential to minimise your exposure to

risk when purchasing off-plan property.

 

This is the checklist that we use for personal investing and also when sourcing

off-plan deals for New Build Sales:

 

1. Does the developer fully own the land? You can ask for evidence of this.

 

2. Does the development have planning permission? Ask for proof.

 

3. How many years has the developer developed for?

 

4. Get proof of other completed developments.

 

5. Ask around about the developer. People in the market know what’s going on

and who is who. Talk to accountants, surveyors, independent financial

advisers, the competition and even the estate agent, if you can. Check the

furnishings.

 

6. Obtain the opinion of a surveyor regarding the quality.

 

7. Carry out comprehensive comparable study.

 

8. Find out what proportion of buyers are investors. The greater the proportion of

investors, the greater the risk when it comes to resale. There may be too many

investors selling at the same time, creating a temporary glut.

 

9. If your development depends on views, check on any current or future threats

to the view. I buy all my properties in London with views of the City or Canary

Wharf. They have great views and are usually near Docks or the River. My flats

achieve 10% more than an equivalent flat without.

 

10. Define the kind of end buyers who will buy the unit and describe their key

needs. Verify that these needs will be satisfied, e.g. local shopping centre,

schools, hospitals, proximity of beach, restaurants, nightclubs. These

needs will differ for every development.

 

11. Something which I can explain in another lesson, creative structuring

and bulk buying. This is a very effective way of making better use of limited

funds. You can often get massive discounts and have an immediate exit strategy

whilst still retaining the property. Yes this is possible!

 

 

Flipping Off Plan

Flipping is the buying of an off-plan property and the selling-on of the contract

before the property is complete.

 

Flipping is leveraging without borrowing. You put down £20,000 to pay for a

£100,000 property that is ready in 3 years. In exchange you get a legal contract

that states you will own the property on completion but must finish paying for it.

 

The good news is that you do not take out the £80,000 mortgage on that property

until it completes. If you can sell the contract for £120,000 after only one year then

the new buyer takes up the responsibility to complete the purchase and provide the

mortgage. You walk away with your initial £20,000 and the £20,000 profit – a 100%

return.

 

When flipping, you never have the hassle of managing the property, and you also

avoid all the buying and selling costs as you never have to register the property!

 

Caution! If you fail to sell, you must be able to complete. Failure to do so will result

in your losing your deposit. This can be a very risky strategy and you must confirm

you have permission to assign the lease before exchange.

Register with us for...
  • Exclusive access to the latest off plan properties
  • Below market value (BMV) investment opportunities
  • Reports and updates on the London property market
  • Professional advice from our dedicated Buying Consultants
  • And much more