Off-plan investment is the act of buying a buy-to-let apartment at the planning or construction stage of development. Although it might seem to be a riskier strategy than buying a completed property, many investors favour this approach because off-plan properties are generally priced significantly below market value.
This is very attractive to investors because, as well as securing a great deal, there is potential for significant capital appreciation as soon as the property has completed.
1. Typically, properties bought off-plan are significantly discounted.
2. There is potential for significant capital appreciation as soon as the property has completed.
3. If you’re purchasing the property as an investment, the returns are generally higher on an off-plan property as the initial investment is much lower.
4. An off-plan property is brand new which means that maintenance costs in the first few years are unlikely.
5. Many off-plan properties are within large developments which often come with a host of facilities such as gyms, cinema rooms and underground parking.
6. When an off-plan property is launched the developer will typically release many units, which means you get the first choice of the available units.
7. Normally you can reserve an off-plan property with a small deposit, and the payments scheduled to be taken during the build.
8. The final payment in the process (which is normally the largest) can be mortgaged*.
Disclaimer: Knight Knox cannot guarantee you will be able to get a mortgage. All clients must be able to complete with cash.
Off-plan is considered risky if the property is being sold without planning permission as the plans can be denied at any point, and even when planning permission has been granted, this does not represent an iron-clad promise that the property will get built.
The simple way to mitigate this risk is to invest with a developer which specifies in buy-to-let property and has a proven track record of delivering developments as promised - Do they have a strong portfolio of sold out, in construction, and tenanted developments? Do they deliver developments on time? What is their reputation among other investors?
Some investors like off-plan buy-to-let property because it generally offers the best returns on investment, not just from the lower-than-average entry prices but also because of the ever-growing rental returns and the substantial capital appreciation investors stand to gain by investing off-plan.