Property investment is one of the most stable ways to grow capital in an increasingly volatile landscape. If you are looking to start or expand a buy-to-let portfolio, consider off-plan purchasing.
Off-plan investments can maximise your investment and eliminate many of the risks attributed to the buy-to-let market.
Are you new to the off-plan property investment concept?
This blog post will cover everything you need to know about off-plan purchasing in 2023 including the potential benefits of expanding your portfolio in such a way.
Intrigued? Let’s jump in.
Table of Contents
What Is Off-Plan Property Investment?
Off-plan property investments refer to buying a home from a developer’s plan. Whereas landlords may purchase a pre-existing brick-and-mortar property, off-plan properties are yet to be built.
So, why do developers sell properties before they are built? When the project starts, developers need plenty of capital to bring their vision to life. As such, they must sell properties ahead of time and request upfront deposits.
Developers use this deposit to purchase materials for construction and pay wages. In addition, they will also be able to gain more capital from lenders by presenting their off-plan property agreements as proof of a concrete purchase.
While homeowners are more inclined to purchase a property they can visit, off-plan properties attract savvy buy-to-let investors who are looking for a hands-off investment opportunity below market value.
Learn more with buy-to-let property experts such as RWinvest, who are UK-based experts in off-plan property investment.
What Are the Benefits of Off-Plan Property Investment?
There are numerous benefits to an off-plan property investment strategy. These include:
- Saving money
- Ability to make a profit before the property is ready
- In-demand units in desirable locations
- Energy-efficient homes
Let’s look at these in more detail.
One of the main positives of off-plan property investment is that buyers can purchase new-build properties below market value. Usually, an off-plan site will save up to 10%. In addition, those properties will then rocket in price once they have been built and ready for tenants.
Typically, off-plan apartments will go for a similar price before they are built. Once complete, the top-floor properties with great views will command a much higher rent.
In turn, buyers will achieve a higher rental yield, especially if they bought the property at the start of the project when discounts are at their highest.
Ability to make a profit before the property is ready
Off-plan properties typically rise in value before construction is complete. Investors may want to place the property up for sale to profit on the unit quickly. While this is a good short-term strategy, savvy investors would benefit further by taking on tenants and enjoying rental income while the property rises in value.
In-demand units in desirable locations
Developers will perform due diligence and run a market analysis to ensure there is high demand for a property in a specific area. When purchasing an off-plan property you can rest assured knowing the property will be highly sought-after.
The housing market has seen a huge boom in rental supply and demand. Prospective tenants are looking for properties more than usual, while supply is currently down.
A report from Zoopla stated rental demand was 46% higher than average. According to the latest Housing Census data, there has been a 28% increase in renters across England and Wales.
Note: New investors should still conduct their research into desirable areas. Property investment companies usually have comprehensive guides and insights into particular areas, helping you make the right decision for your investment strategy.
Investors will find that off-plan properties should adhere to the latest government EPC regulations. From April 2023, properties must obtain an ‘E’ efficient standard or higher.
This rating ensures the home is safe and energy-efficient, which is both good for the environment and a selling point for prospective tenants and buyers.
In the dynamic landscape of 2023, off-plan property investment emerges as a strategic avenue for capital growth, particularly if investors purchase property when the housing market is down.
Offering cost-efficient entry, potential early profit, and alignment with rental demand, this approach bears allure. The prospect of energy-efficient homes further enhances its appeal.