Many investors want a property they can buy, get a tenant in immediately, and start earning a rental income. This is a fine and sensible choice, but one downside is that such properties are usually found on the secondary market (i.e. you’re purchasing from the previous homeowner or landlord), which can be much more expensive than purchasing a brand new property during construction.

For those who can afford to wait for an investment to start delivering a return, off-plan often represents a fantastic opportunity to land a deal in which the long-term benefits significantly outweigh the short-term pain of waiting for completion.

It’s undeniable that off-plan property investment represents a risk. Unforeseen events can affect construction, which may delay the completion date or, in extremely rare circumstances, end construction altogether. Of course, this is why it’s important to complete due diligence before any purchase – and there are usually schemes in place to protect investors from construction issues – but if you are quite risk-averse then off-plan property may not be for you.

Please note, keep in mind that in the UK with new build developments, if a developer is NHBC approved (UK National House-Building Council) then both the development and your deposit are guaranteed, which you can fall back on should there be any issues with completion.

Unless you’re buying in full with cash, you’ll likely need to leverage finance. Off-plan property can be bought with a mortgage, but mortgage lenders will typically only provide a mortgage offer for up-to six months in advance. However, with an off-plan property the estimated completion date is often more than six months away. 

So, an investor needs to be pretty confident they’ll be able to get a mortgage when the time comes. A good rule of thumb in the industry is that if you have lots of lenders available to you now, the likelihood is you’ll be able to get an offer in the future too. However, this depends on the market conditions and your personal circumstances, so we always advise speaking to a specialist mortgage advisor before making any decisions.

If, after considering the questions in the section above, it looks like off-plan property could be a suitable choice for you, then below are some of the advantages off-plan investment offers.

Off-plan buyers can choose the most desirable and best located properties within a scheme, meaning they have first-access to properties with sought-after characteristics, such as: a high floor location, a corner unit, proximity to a courtyard or communal facilities, unusually large living space, a balcony, or an amazing view. Such characteristics can affect both rent and tenant demand, leading to higher than average rental yields and a better return-on-investment. Furthermore, in the future, these characteristics may be the difference between obtaining an average or premium price, should an investor wish to sell.

Off-plan buyers can choose the most desirable and best located properties within a scheme, meaning they have first-access to properties with sought-after characteristics, such as: a high floor location, a corner unit, proximity to a courtyard or communal facilities, unusually large living space, a balcony, or an amazing view. Such characteristics can affect both rent and tenant demand, leading to higher than average rental yields and a better return-on-investment. Furthermore, in the future, these characteristics may be the difference between obtaining an average or premium price, should an investor wish to sell.

During the construction process, developers will typically request a 25-30% deposit from buyers. This “locks in” the sale, with the remainder to be paid once construction is complete.

In the meantime, an investor can benefit from any growth in property value. For example, if the value is £100,000 and the build time frame is two years, an investor would put down a 30% deposit of £30,000 to reserve the property and lock in the agreed price. However, the property’s value can increase during this time. Say, over the two years, property prices increase by 5% per annum, then the investor will only pay £100,000 for a property which is now worth £110,000.

The investor now has the opportunity to immediately “flip” the property for £10,000 cash profit.

Developers will often incentivise buyers to purchase off-plan by offering a substantial discount on the price, meaning an investor can often end up paying well below the market rate for a premium property.

Furthermore, the discount achieved will likely outweigh the total rental income that could be generated during the same period if an investor purchased a completed property instead.

So, often it makes more sense to invest in a quality, more desirable scheme at the base price from the developer rather than going for something immediately available, even considering the wait for completion.

To get the best properties in a city, buying off-plan is the way to go.

In recent years, investor attention has shifted from London and Birmingham to Manchester and Liverpool. Supply cannot keep up with demand, meaning that all truly high-quality, city-centre property in convenient locations sells out well in advance of completion.

If you don’t want to be left with an extremely limited range of options to choose from, i.e. buying from investors or owners that want to exit at the time, then it’s smart to buy in advance to get the best choice.

Typically, an off-plan property investor will have the choice to sell anytime after the exchange of contracts.

As we highlighted above, this means the investor can instantly sell the property for profit if the market has improved during construction. 

Alternatively, the investor can hold onto the property, monitoring the market to pick the best time to sell, all the while reaping the rewards from a consistent and predictable rental income.

Investors can purchase furniture packs tailored to the unit’s size and layout, meaning the apartment is perfectly furnished and ready to rent on completion. 

This will drive tenant interest, allowing investors to target tenants who are happy to pay a premium for convenience and luxury.