Planning on purchasing your next investment property? There are many factors you should consider – is a new build or resale property the best option? When is the best time to invest? Should I invest in commercial or residential property?
In the latest of our At Home With Centrick articles, we consider one of the most important decisions you’ll be faced with when opting for the perfect investment property… should you buy off-plan or complete? There is no right answer to this question, as each variant offers different benefits and drawbacks. It’s a matter of determining which option will help you reach your investment goals and work best with your existing portfolio of properties.
First – what exactly is an off-plan investment? In short, an off-plan property is one that is not yet completed. In some cases, off-plan purchases are made before construction even commences. Buyers will purchase off-plan units based upon floorplans, location, and visual mock-ups of what the completed development will eventually look like.
On the other hand, completed investments are rather self-explanatory. Unlike off-plan units, completed units are fully constructed and ready to view. In short, completed properties physically exist, whereas off-plan properties are yet to be completed. So, which options should you opt for?
The most appealing benefit of off-plan property investment is the fact that these units, once complete, may be worth more than the original purchase price. This capital appreciation means that investors essentially secure the unit for a below market value price. What’s more, if an investor purchases early enough, they will get their pick of the best, most suitable unit within the development. There will be no wear and tear, and no need to update appliances and technologies to become more modern – this property is already as modern as it gets!
If you’re hoping to live in the property in-between tenancies or make it your mail residence, you can benefit from the personalisation options that come with new build units. Many developers will give investors a level of input into the unit’s design as construction continues, allowing you to create a truly unique home. There are even benefits to the wait between purchase and completion – investors don’t have to secure a mortgage until 6 months before completion, which means that you may be able to wait for more favourable mortgage rates. You will also have time to carry out research to find the best deal, as well as having more time to save money for a mortgage deposit.
However, buying off-plan does have its drawbacks, namely due to the fact that you are investing in a property that does not physically exist yet. This means that you will have to wait to start generating rental income until the unit is ready. Furthermore, this leaves buyers vulnerable to potential delays in the construction process which may impact mortgages, as mortgage agreements are time-sensitive. Some investors may also be dubious of the fact that they are unable to physically visit and view the units they have purchased for many months, or even years. There remains the risk that some developers could go bust prior to completion, which is why it is so vital to choose a trusted partner to ensure that you do not lose your deposit.
Lastly, there is no guarantee that you will purchase an off-plan unit in a positive market. There remains some risk that the unit may be worth less than you paid for it by completion.. It is vital to speak to a knowledgeable estate agent such as Centrick prior to making such a significant purchase.
Are you reluctant to purchase off-plan? In this case, a completed property purchase may be the best avenue for you. The most significant benefit of purchasing a completed property is the transparency you get from being able to physically view the unit. You can examine the property, the development and the surrounding area before committing to a purchase. This puts many investors’ minds at ease before they take the leap towards making an offer.
There is also less risk of time delays with completed properties. If you’re looking to expand your property portfolio fast, or want to move into a new home quickly, there are plenty of readily available chain-free completed properties on the market. Investors are able to generate yields immediate yields by finding a tenant straight away and starting to make a return on their investment. Additionally, buyers generally find it easier to obtain mortgage offers for completed properties, too, as lenders are more dubious of the potential delays associated with off-plan construction. So, if you’re hoping to expedite your property journey, a completed unit may be the best option.
However, purchasing a completed unit does have its difficulties, especially if you were hoping to personalise your unit to suit yourself or your target tenant. You may also be left with a limited number of units to choose from, with the vast majority of new build units likely being snapped up in the ‘off-plan’ phase by eager investors. This could leave less desirable units available that may not suit your needs, and could mean that you may more for the same unit if you’d bought off-plan.
There are also drawbacks when it comes to timing – although completed units are available immediately, this means that you will have to secure a mortgage as soon as possible. If you do so in an unstable market, or whilst rates are high, you will not get the best value. You may also experience a rush to find a tenant to ensure that you can make your mortgage payments and avoid the dreaded void period wherein your unit secures no income. Should you find a tenant in good time, you may be required to furnish the property straight away. Be sure to build this into your budget.
There is no simple answer as to whether completed or off-plan investment is the best option. The answer depends on your investment goals, existing portfolio, and property needs. This can make finding the perfect property a challenge, which is why Centrick have created the Earn At Home hub, The hub provides you with the necessary guidance to boost your portfolio health and guide you towards making the best investment decisions. Looking for more tailored guidance? Fill out the form below and a member of our team will be in touch soon.
November is coming to an end – Christmas lies on the horizon, and New Year’s Day is...
This morning, King Charles made his first speech to open Parliament, outlining the key pieces of reform...
Residential property investment expert Centrick Invest has expanded with the appointment of a new team operating in...
Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.
Keeping these cookies enabled helps us to improve our website.
Please enable Strictly Necessary Cookies first so that we can save your preferences!