What do we mean by off-plan property?
Off-plan property investment is all about buying a property before it’s been built. It might be under construction, a hole in the ground with planning permission, or very occasionally little more than a twinkle in a property developer’s eye. Compared to buying traditional established property, this can be a great opportunity to purchase at a lower price, but it also comes with a higher level of uncertainty and risk. That’s why due diligence is crucial when considering off-plan property investment. There’s a keen sub-culture of investment buyers that love the off-plan model and for fairly sound financial reasons, but we’ve learned over many years that a huge part of being successful at it is research, research and then a bit more research. It’s extra time and effort at the outset, but it’s very well spent. As the tailor’s mantra goes, “measure twice, cut once”.
In case you’re new here
Due diligence of course, is the process of thoroughly investigating and evaluating a potential investment before committing to it. It’s a way to ensure that you’re not just blindly throwing your money into something without understanding the potential risks and rewards. It’s an essential step in making sure you’re making a smart decision.
Why is there more to research with off-plan property?
When it comes to off-plan property investment, there’s extra due diligence you should (and please read that as “must”) do. Your due diligence will include much of what you would normally check if you were buying an existing property, such as understanding the location and surrounding area, the rental market prospects, the market conditions and the potential for appreciation of the property. And of course pre-empting all the dull but important questions that a lender’s surveyor will ask when it comes to mortgaging the property.
With off-plan, there’s a whole extra layer of checks that you ignore at your peril. These should involve researching the developer’s recent track record, and very carefully reviewing the plans and specifications of the property. It’s also important to understand the payment schedule and the completion date of the project. Furthermore, it’s essential to review all the legal documents, such as the purchase contract, the title deed and the developer’s financials. This in essence is all about being as confident as you can possibly be that the property will be built and delivered to you on time and to the promised specification.
But there’s more. It’s also vital to research the developer’s reputation, check their previous projects and ideally get references from previous buyers. This will give you an idea of their level of professionalism and the quality of their work. Additionally, It’s also important to be diligent in researching the property agent you’re working with. Make sure they’re members of an Ombudsman scheme and have a good reputation in the industry. It’s also important to understand the terms of their agreement and any potential conflicts of interest.
Getting smart with Due Diligence
We love off-plan property investing when it’s done well, and that takes your own careful planning and a sound due diligence regime to pick well and avoid backing a dud. With the great emphasis on increasing the housing stock in the UK, there is usually a wide selection of property developments to choose from at any one time. So when you’re hunting for your next investment, you will likely be looking at several with a view to choosing the best possible fit for your particular investment strategy. This means that your due diligence process must be repeatable, comparative, thorough and timely.
This is where Diligent Eye comes in very handy. You can use our oven-ready reports on the most popular off-plan developments of the day (and if one of your favourites isn’t on our list, you can request it). With our unique scoring system you can carry out side-by-side comparisons easily to support and turbocharge your own due diligence.
Drop us a line or chat with us on social media if you would like to find out more about how we can help you with this.
Staying on the rails
Extensive due diligence is an essential step in successful off-plan property investment. It allows you to make an informed decision by thoroughly investigating and evaluating the potential risks and rewards of the investment. It helps you to understand the developer’s track record, the estate agent’s reputation, the market conditions and potential appreciation of the property. Therefore, it protects you as an investor by ensuring that don’t sink your money into something without understanding the all potential risks and rewards.
Keep your off-plan strategy on the rails and focus on the fun side of property investing!