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.
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
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%
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.
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