Buying property off-plan

Buying off-plan can be a great buy-to-let strategy that can bring a number of practical and financial advantages. But it is not without risks, and it’s important to be aware of the process, the pros and the cons. In this article we’ll be covering all of this.

Building site housing development — Develepment St. Ninians, Stirling

What does buying off-plan mean?

Buying a property off-plan means committing to purchase a property before the construction is complete or in some cases before it has even begun. You will be able to see your property on an architect’s drawing only and you can visit the location, but you cannot view the property. You are required to pay a small deposit at the point of reservation and the balance falls due on completion of the build.

Selecting a property

The developer will typically market their properties either directly or via an agent on the usual property websites like Rightmove, Zoopla or OnTheMarket. In some cases, there will be a site office which you can visit and look at plans, get a feel for the location and talk to the sales staff. If you are happy with the general location of the development it comes down to selecting a property type, its location on the development and the specification. There are many factors to consider here such as the size of bedrooms, orientation towards the sun etc. In many ways it is similar to the selection of a pre-owned property, so I will not cover all aspects here in detail.

Are you able to finance the purchase?

If you are planning to finance your purchase via a mortgage then you should get a ‘decision in principle’ from your mortgage lender before committing to a purchase. We would recommend going via an independent mortgage broker who will be able to advise you about the best options for your specific situation. They have access to many lenders and their expertise can often get you a better rate than going to one lender directly. Having a mortgage decision in principle (DIP) will make you a more serious buyer in the eyes of the developer’s sales manager and could put you in a better position to negotiate on a deal. If you would like a recommendation for a mortgage lender then I’d be happy to recommend the Stirling Mortgage Shop. You can contact their team on 01786 449969.

Reserving the property

Once you are happy to commit to the purchase it’s time to reserve your property. You will be asked to pay a small fee of between £500 and £2,000. This fee is usually non-refundable but will be taken off the purchase price when the balance is due. This fee is usually paid to the developer’s solicitor.

The conveyancing process

At this stage you should involve your solicitor / conveyancer. It is his/her job to look at the sale contract and liaise with your mortgage broker to ensure funds are available when they fall due. Once the property is completed contracts will be signed and keys are handed over.

Completion and snagging

With most new-builds you have to expect some level of snagging to be done. This usually involves you drawing up a list of items / defects that you want the builder to address before you are entirely satisfied with the handover of the property. If you feel that you are not entirely confident with the task then you can enlist the help of a building inspector. For example check out https://snagproscotland.com/
It can be a tedious task to get all items finished off by the developer as they are often working to their own agenda and once they are off-site it can be a battle of persistence to get them to come back and carry out repairs.

Weighing up the pros and cons

Advantages of buying off-plan:

1. Attractive Price Incentives: The allure of securing a property at a discounted purchase price is a primary draw for off-plan enthusiasts. Developers often offer incentives to entice early buyers, ranging from reduced rates to exclusive add-ons. This advantage not only enables investors to secure a more favorable deal but also lays the foundation for a potentially lucrative return on investment.

2. Embracing the New: Investing in an off-plan property guarantees a pristine, untouched canvas to work with. With a brand-new structure, investors can revel in the modernity and elegance of their investment. Additionally, most off-plan properties come equipped with a generous 10-year builder's warranty, offering peace of mind and safeguarding your investment against unexpected issues.

3. Tailored to Your Tastes: The flexibility to choose from an array of styles, sizes, and locations empowers investors to curate a property that aligns seamlessly with their preferences and investment goals. Whether it's a chic urban apartment or a serene suburban villa, the off-plan approach accommodates a diverse range of needs.

4. Capitalizing on Appreciation: The unique timeline of off-plan investments often coincides with the property's development phase, allowing investors to potentially capitalize on value appreciation before even taking possession. As surrounding infrastructure and amenities improve over time, your property's worth might soar, translating to a favorable resale potential.

5. Personalized Touches: A distinctive feature of purchasing off-plan is the possibility to customize certain aspects of the property before construction concludes. From interior design nuances to choosing finishes and fixtures, investors can inject their property with a personal touch, enhancing its appeal and distinctiveness.

6. Ahead of the Curve: One of the most significant perks of an off-plan purchase is acquiring a property built to the latest building regulations and standards. This ensures your investment is aligned with modern construction practices, enhancing its durability and long-term viability.

7. Energy Efficiency Delivered: Increasing environmental consciousness has elevated the importance of energy-efficient properties. Off-plan investments often integrate the latest sustainable technologies and designs, leading to properties that are not just contemporary but also eco-friendly, potentially saving on operational costs and enhancing market desirability.

Disadvantages of buying off-plan

1. Delays: Unexpected delays in the completion process can mean that your mortgage offer might have expired, but you are still legally committed to the purchase of the property. Pulling out at a late stage can mean that you will loose your deposit.

2. Quality issues: Since you can’t usually see the end product before the buld has been completed you might find that the end product is not as expected. At best you are left with a lot of snagging issues, at worst you are simply not getting the quality you were expecting.

3. Financial issues: There’s a risk that the builder goes bust during the construction period in which case you could potentially lose your deposit.

4. Market fluctuations: Depending on the length of the construction and your initial expectations it is possible that the end market value is lower than you initially expected.

5. Oversupply: With further new developments springing up around you a potential oversupply of similar properties could surpress the market rates for your property in terms of resale or rent.

6. Misleading discounts: Discounts and deals given by the builder might turn out to be more of a marketing trick than a real discount.

Ridgewood deveopment Stirling — Persimmon Development Stirling

Conclusion

Delving into the world of off-plan property investment can offer substantial rewards for those who seek to diversify their portfolios intelligently. From financial incentives to customization, and the prospect of value appreciation during teh build phase, the benefits are undeniably enticing. As with any investment, meticulous research and due diligence are important, but adding an off-plan investment could be a useful addition to your property investment strategy.