Buying new build BTL property and buying BTL property off-plan

Investors entering the buy to let (BTL) investment market in the UK are often attracted to the advantages offered by the many new build developments to give them the security of knowing that everything is new and will generally covered by building guarantees for a good number of years to come. This certainty gives a lot of peace of mind as the troublesome problem of handling repairs is generally avoided.

Investing in New build property

Buying a new build or off plan property can provide investors with some worthwhile benefits.

Benefits of new build property

  • New build property features – Large property developers generally take great care to ensure their developments contain a good variety of house types to appeal to a wide range of purchasers. Developers will often have good outdoor spaces with provision for off street parking.
  • Minimum repair bills – New build properties have a clear advantage over older property as strict building regulations ensure a good standard of construction ans will come equipped with a 10-year structural warranty and knowing everything is brand will and reducing your outlay for repairs over the next few years is good news.
  • Low heating bills – Modern construction standards ensure that your tenants will enjoy lower running costs through the improvements in insulation and double glazing. These modern improvements should make the property more attractive to tenants and minimise your down time.

Check out the contract conditions that will apply as once you have signed up to purchase you will be committed. Property developers vary in quality and in the way they transact with their clients so if you intend to invest, always be wary and take great care to check everything out.

Some tips worth considering

Things to consider when before buying a new build or off–plan property.

  • Developers – Do some research on the developer and study any reports on their background, ownership, financial status and check any forums to see what people are saying about them.
  • Talk to neighbours – If your development contains some completed units ask your potential neighbours if they have been happy with the process and build quality. They may point out things to use in any negotiations with the developer.
  • Existing properties completed by your property developer – Visit any sites that have been completed and see how they stand up to scrutiny. You may be able to talk with tenants living in the development and establish how they are finding the experience.
  • Promotional leaflets – Never rely on the developer’s promotional material and make sure you get a proper feel by visiting the site and checking out the local area.

Off–plan property

What is meant by off plan property?

This simply means that you will be purchasing your property while it is still in its early stages of completion.

Buying off–plan

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. Investors can usually secure a unit simply by putting down a relatively small deposit or agree an arrangement where deposit is built up over the period of construction. Generally, once you have signed up to purchase you will be legally committed to complete the purchase on completion regardless of any movement in the future value of the development.

Advantages of buying off plan as opposed to New build purchases

Buying off–plan is essentially the same as buying a new build property with the exception that with a new build completed property you can establish its value for financing purposes. However with new build there may be many people urgently needing accommodation and therefore will be competing with you for that property. With off-plan you are taking a risk on its future value and will not be able to secure finance until the property can be valued, usually very near completion. This risk factor reduces the competition but allows you to secure a well positioned property at discounted prices with additional incentives. It can often be up to two years between purchase and completion.

Key advantages

  • Individual features – Because the property has yet to be built the buyer can sometimes have adjustments made to the layout and fittings by arrangement with the developer.
  • 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. However we would recommend that you always employ your own solicitor.
  • More choice – With off plan developments you can usually pick from a range of units. If its a flatted development you will be able to chose the floor level, number of rooms and outlook. With individual homes you will be able to chose your plot.
  • Price escalation – In a rising market purchasers putting down a small deposit with the remainder not becoming due for some time can often make a good return on the property by selling before completion if your contract conditions allow this.

Tip tips when buying off plan

  • Property – Investors should ensure they have checked all the plans and specification for the property before instruct their solicitor.
  • Promotional materials – Do not pay too much attention to the glossy brochures. Ensure you have a copy of the original build specification to ensure the developer carries out the work correctly. You do not want to become the owner of a property that is not what you were expecting.
  • Mortgages – Mortgage offers are usually only valid for six months so and can only be applied for long after you have committed yourself to purchase. This means that you cant be sure that you will qualify for finance when the property is complete. If finance will be needed then back up arrangements will need to be established.
  • Completion dates – The completion date for an off–plan development can slide putting your mortgage offer out of validity. If you think this could happen you need to check with your lender that an extension will be granted.
  • Snagging list – This is a list of items that the builder has not completed properly during the build period or will be general defects found on taking ownership that need to be put right.
  • Project build program – Investors need to be aware of exactly when the development will be completed. If it is due to complete in phases then check how the on-going construction activities will affect your tenants.
  • Property location – Chose your location wisely if you want to see good growth on your property value combined with good rental returns. Almost all sectors of the UK property market have been seeing price growth but some areas have moved faster than others. Birmingham, Manchester and Edinburgh for instance saw property price growth in 2017 at up to 6.7 percent.
  • Transport links – transport links are highly desirable for tenants. 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. New build and off-plan property can often see a drop in value in the first few years but then pick up with the wider market. However, investors should be investing for the long term and if this is the case any downward trend should be quickly reversed.