Buying New build and Off Plan Property


Buying New Build and Off-Plan Buy to Let Property in UK

Expats who thinking of entering the buy to let (BTL) market in the UK often take advantage of the many new build developments becoming available to acquire a property that gives them the security of knowing that everything is new and will generally covered by building guarantees for a good number of years to come. For expats entering the market for the first time, this certainty gives a lot of peace of mind as for at least a few years, the troublesome problem of handling repairs is generally avoided.

This of course equally applies to UK based landlords but is more relevant to expats because being remote from the properties location they usually have to rely on family members or letting agents to maintain the property.

New build property for expat investors and UK landlords

Buying a new build or off plan property as a long term investment into the buy to let (BTL) rental market may provide certain benefits some of which are described below.

Benefits of new build for Expat BTL investors and UK landlords

  • New build property features – Reputable property developers now take great care to provide a good variety of house types and sizes on any new development. These can range from small one bedroom flats to large detached houses with gardens and parking facilities. Often developers will have planned in good outdoor spaces and made provision for off street parking and attractive features and green spaces.
  • Minimum repair bills – When it comes to repair bills new build properties have a clear advantage over older property as strict building regulations mean that any new build property will have been constructed to a high specification and will come equipped with a 10-year structural warranty. With everything being brand new and fit for its intended purpose any outlay for repairs over the next few years should be minimal. This will maximise the amount of retained income generated from the property being rented as a buy to let investment. A further benefit will be that your tenants will appreciate the convenience of everything being in perfect condition and working as it should.
  • Low heating bills – Modern construction standards have revolutionised the living qualities that new build property provides through improvements in insulation and double glazing which makes the home wormer and less expensive to heat. Modern heating systems are constantly improving their efficiency ratings meaning that heating bills will be lower for a given size of property. These modern improvements should make the property more attractive to tenants and minimise down time.

Things for expat BTL investors and UK landlords to look out for

In the same way as you would check out the contract conditions when buying a holiday or a car, buying a new build property will require at least the same amount of care and attention to be paid to the purchase contract as the sums involved will be much higher. Property developers can vary in quality and in the way they transact with their clients so any buyer must always be wary and take great care to check everything out prior to making a commitment to purchase a new build property.

Unlike manufacturers and retailers of other types of goods, property developers do not generally have to compete with each other to sell their property so their approach to sales and the quality of their after sales service will never be consistent. This is where you need to do your own research to confirm everything is as it should be.

There are crooked and unscrupulous people everywhere and property developers are no different so make sure you do your homework.

Some tips worth considering

Here are a few things to keep in the back of your mind when starting to look at potential new build or off plan properties.

  • Developers – Get to know the developers in the area where you want to buy and research them online. Look out for where they are mentioned on forums and see what people are saying about them.
  • Talk to neighbours – If the development has already been partially completed ask any existing neighbours how they have found the process of buying. They may point you to things that you can use to your advantage during your negotiations with the developer or tell you about specific things to watch for in the contract. They may even advise you to look elsewhere.
  • Existing properties completed by your property developer – Visit any sites that have been completed by the property developer and see how they stand up to your scrutiny.  This is also your opportunity talk to the residents and find out what they have to say about their own experiences in dealing with the developer and how any snagging issues were dealt with. You may even be able to talk with tenants living in property that was bought for the buy to let (BTL) market and find out how they have found the suitability of the property to live in.
  • Promotional leaflets – Never rely solely on the developer’s promotional material. Get a feel for what you are buying by visiting the site and the local area. Check out transport links and if the property is intended for your own use, do your journey to work and walk to any local facilities to get a good feel for its practicality. If the property is to be a buy to let (BTL) investment then look at transport and any local facilities from the perspective of a prospective tenant.

Purchasing Off plan property

 

What is meant by off plan property?

Buying an off plan property typically means purchasing a property during the construction part of the building process. Often quite substantial discounts can be negotiated with the developer which makes them attractive to property investors.

Buying off plan for expats and UK landlords

Buying off plan means that you will be purchasing a property before it has been completed and often before construction has started on the site. Although any type of development can be sold off plan, it is more common for such properties to form part of a large scale development. The appeal of buying off plan property is identical to buying new build as detailed above but with the added potential advantages of securing a property for perhaps a year or two ahead. Buyers can secure a unit on the day of launch simply by putting down a relatively small deposit and if upon completion the property has increased in value, the buyer will benefit from the added value and perhaps obtain easier financing arrangements.

 Advantages of buying off plan as opposed to New build purchases

The advantages and disadvantages of buying off plan are essentially the same as buying a new build property once the property has been completed and is in your possession. However the main differences lie in the time between you learning about the new development and the property you have contracted to purchase being completed. This period can often run to around two years.

Key advantages

  • Individual features – Because the property has yet to be built the buyer can often have adjustments made to the layout and quality and type of fittings that are installed by arrangement this with the developer prior to signing contracts. This can help you ensure that the finished property is ideally suited to its intended use, either as a buy to let (BTL) investment or for your own personal use.
  • Simpler buying process – The buying process is usually simpler as the developer can provide a solicitor and all the usual legal searches will have already been completed. Because of this it is not unusual that when you first view the property site you can sometimes be expected to exchange contracts there and then. This may not be a wise thing to do.
  • More choice – Unlike purchasing an existing property which only becomes available when the owner is ready to sell up, with off plan properties you can usually pick from a range of different houses or apartments or studios and even specify the exact location of your intended property purchase within a specific development block.
  • Price escalation – In a rising market purchasers putting down a small 5 percent deposit with the remainder not becoming due for some time, may make a good return on the property by selling before completion. This is only possible if the contract conditions allow for this but if they do, you can make a very good return on your initial investment.

 Tip tips when buying off plan

  • Property – buyers should ensure they have seen all the plans and specification of the property by the time they come to instruct their solicitors.
  • Promotional materials – Don’t rely solely on promotional glossy brochures. If you don’t have the original specification then the developer can essentially change the build and you could become the owner of something you were not expecting.
  • Mortgages – when it comes to getting a mortgage for an off plan property, buyers should be aware that any mortgage offer is likely to be valid for only six months.
  • Completion dates – The completion date for purchasing off plan can extend beyond the mortgage validity so check with your lender to ensure any mortgage offer will remain valid during the build period..
  • Snagging list – buyers should check their contracts thoroughly to ensure it allows time for a snagging list to be drawn up ahead of completion. This is a list of items that the builder has not completed effectively during the build period or could be for defective work that needs to be put right.
  • Project timescale – Buyers should find out exactly how long the development will take to complete and how it will be managed by the property developer. If completing in phases then check how the on-going construction activities will affect you or your tenants through the noise of heavy machinery.
  • Property location – Location is absolutely the key if you are to see good growth on your property value and good rental income if the property is for investment. Almost all sectors of the UK property market has been seeing price growth but some areas move faster than other. Birmingham, Manchester and Edinburgh for instance were among the fastest growing cities in the UK for 2017 with highs of 6.7 percent growth.
  • Transport links – transport links and access is also highly desirable for people looking for growth. The two largest transport developments happening in the UK right now is HS2 and Cross-Rail, both of which are aiming to bring faster and more efficient services. Property purchased on these routes could see high growth in the future.

Downside of buying new build or off plan property

With everything in life there are swings and roundabouts and new build and off plan property is no exception. The main downside with this is the same as with any new item that you buy in that as soon as you have purchased it, its value drops. This is the same for new build properties although the drop in value with property is usually very slight. However, like most investments if you are buying for the long term which would be the main objective of people buying for investment into the rental market this initial drop in price is usually corrected in a year or two as property price escalation starts to kick in. With off plan property this can sometimes be avoided due to the buyers ability to sometimes negotiate good price reductions when signing up to purchasing.

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