Off Plan Property Explained
Off Plan Property Explained
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Off Plan Property buying is an increasingly common way for new build properties to be completed. Juliet Cook outlines the advantages and the process involved.
Buying property off plan means the purchase is carried out while the property is still a series of designs on an architect’s drawing board. Getting involved at this stage holds many financial advantages for the potential property investor. For example, if house prices are rising, you can lock in the capital gain during the build period, allowing better finance to be arranged ahead of completion
Step-by-step: the off Plan Property process
- Reservation and introductory fees are payable immediately on reserving a property. There is usually a 28-day window from initial reservation to exchange of contract.
- Investors should instruct a lawyer, who will liaise with the developer and make sure the contract for the purchase is received.
- On receipt of the contract, the lawyer will require the buyer to sign the documentation and ask for a deposit to secure the property. The balance is due when the construction is completed, usually after 18 to 24 months.
- Throughout the construction, buyers should keep themselves informed on the developments progress.
- Approximately three months before completion, the buyer should instruct their preferred mortgage broker to investigate a mortgage.
- There are no set rules on what the investor does next. The buyer can either sell on completion, taking the profits generated by the rising property market or they can keep the property for a period and rent it to tenants, thereby generating a rental income stream. Combinations of approaches can be used across a portfolio of investments.
- As the property approaches completion, there are many issues to consider, such as snagging (sorting out little problems within the property before you complete) through to finding local letting agents and furnishing the property. Specialist companies can advise and arrange many of these things.
The advantages of buying off plan property.
- Less cash is required than when purchasing a completed development.
- Build in profit. If past performance is any guide, the investment may well rise considerably in value during the 18 to 24-month construction period. These gains can be locked in when mortgage finance is arranged.
- At a time of uncertainty over pensions provision and with lingering concerns about miss-selling, investing in property looks increasingly attractive. Historically, UK property prices have doubled every seven years.
- Property demand is currently outstripping supply. Social change is increasing the demand for city-centre properties (where much of the new build is taking place), which, in turn, pushes up rents and asset prices.
Off plan explained – Juliet Cook – Property Portfolio Magazine.