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  • Buy-to-Let

    Buying off-plan a good strategy for newbie?

    Morning everyone,

    I am quite new to this wonderful group. I am also new to the BTL market with only one BTL in my portfolio. I know there are new tax laws and changes will affect the BTL and the landlords. Also with BREXIT is on the way, nobody knows what is going to happen.

    I have been looking at different options to invest my cash savings but hardly found any reliable choices, so I started looking at the property option again. I am interested in buying one bed Off-plan, it won't be completed until Dec 2020.

    I have never invested in any Off-plan before and would like to know if this is a right decision for me?

    I would very much welcome and appreciate anybody's opinion and advice!

    Many thanks

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    Hi Jade and welcome.

    Buying off-plan is quite a high risk strategy for anyone, let alone a newbie imho.

    It is more speculation than investment.  You are speculating that the development will be completed and that prices might rise during the build period.  You might also find that a lot of investors have purchased off-plan, meaning that you will be competing for tenants once the building is finished.

    In the current economic and market conditions, the risks are far higher in my opinion.

    The safest and lowest risk way to get started is to buy a tenanted property.

    See - Benefits of buying a tenanted property

    I hope that gives some food for thought/direction and good luck!

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    Many thanks Vanessa for your comments and suggestions, I think they are really useful and valuable. I think I need to be very careful and probably not go ahead with the Off-plan.

    Also, do you know the company called Nova Finance Ltd? I am thinking if they are genuine and can be trusted I may use their service and the help for my property investment portfolio.

    Obviously, I will need to pay for their service if I decided to use them.

    From your knowledge, should I trust them and their services or not?

    Any suggestions will be very much appreciated! Smile


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    Hi,


    One of my friends bought a new house off plan, they watched it go up from just some sticks and string marking out the plot to the 4 bed family house it is now.

    they loved how it looked as it was going up and moved in, furnished and bought a cat...

    He actually hates it (the house, hes ok with the cat). He says it hasn't been finished properly and the walls are thin, he is a sparky and has rewired some of it too. He even had to do the silly task of turning a light switch up the right way!

    Every wall has been washed in white matt paint and it shows any mark and then any attempt to clean it leaves a smooth patch.

    The bathroom light in the morning, mixed with the white paint/tiles/suite is blinding and his plumbing vibrates when you turn off the cold tap/flush the loo.

    They are going to be moving out soon.


    However.... This is probably just a one off and my friend is very much a perfectionist (and likes a good moan) so maybe its also that. Wink

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    Financial Consultant working with Property Tribes Financial Services.

    BTL Specialists.

    Always cover your debts, don't leave them for your loved ones to pick up. Ask me how - austyn@ptfs.co.uk     07500 871209

    Things to consider when buying off-plan:

    - What's the developer's track record? If they have completed other developments, check their quality, see if you can find out if they were built on time/schedule

    - What's your objective? i.e. why do you want to invest in property, and in an off-plan? Does the strategy match your objective? 

    - See if you can determine a rough split of  owner occupied vs investor purchases within the development. If there's a high % of investors, then when it's built, you'll be competing with all the other flats for tenants plus the existing stock that's already available.

    - Check the proposed service charges -  will the development have facilities like gym, cinemas, lifts? If so, charges will eat into your profits

    - If you are looking at a particular area for the off-plan, have you checked what's available on the market now that's already finished and being rented out? What else can you get for your funds that you can start earning £ straight away as opposed to waiting for Dec 2020 (assuming it completes on time)?

    Do your due dil, even if you're thinking of using a sourcer or investment company like Nova. There are plenty of companies that sell off-plan properties, many which receive commissions for doing so, so just double check everything if proceeding down this route.

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    Thanks Derek for your very helpful points. I probably will stay away from it. You are absolutely right, it is quite risky to go for this sort of investment without very good knowledge and checks.

    I think I will use my savings towards the conversions in the home rather than borrow much development loans from any banks. We are going to build two semi-detached houses very soon. I was planning to borrow money from banks to get these two houses built and then remortgage.

    I will see if we can get good rates then we would borrow, otherwise will use my own savings to help with the building cost. I hope this will be the right thing to do. Thanks again for your very thoughtful views and I welcome any more thoughts from you. Smile

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    Having purchased 5 Off Plan New Build Leasehold Apartments in 2005 - 2008 I wouldn't repeat the process again.

    Don't get me wrong, I was happy with the quality finish, great location / development and the Yield has been good with few voids.

    However, I've not seen any real capital appreciation in over 10 years (timing wasn't on my side when bought with the crash) The Service Charges grate on me £600 - £800 each per annum, every time I have to pay them.

    I would avoid Apartments/Flats personally.
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    Hi LandlordAgent, I just feel so grateful that I have received all these valuable opinions from you and the wonderful Derek, what can I say, you people are just so incredible and amazing, I am sure every newbie would appreciate a lot.

    The reason I was looking at the Off-plans, I was thinking for the future value / capital growth as I would only need to pay max 30% upfront,  but like what you said, the service charges would eat any profit if there was any in the future, and also there is no guarantee about anything.

    I will stay cool and do lots of research, plus we got our own conversion projects to do in the home, I properly should focus on this I think.

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    NP, the thing is with Apartments/Flats in general, other than capital appreciation which you may gain eventually, you can't really 'add value'.

    If you purchase Freehold Terraced or Semi Detached Houses then you can 'add value' through roof conversion, extension etc so thinking now in hindsight that would have been a better long term option and you don't have on-going service charges that in time you resent.

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    Sorry but 30% upfront?? Surely that’s all your cash, assuming you’re leveraging for the rest? If you’re going to put all your funds into a deal at this point, invest in something that exists. That way you at least get your rental return. There are plenty of opportunities out there with capital growth prospects - both off-plan and stock. Off-plan can be a great strategy (I’ve just secured an off-plan myself) but the maximum I would ever put down would be 10%. I would also make sure that 10% was protected, so if the developer went bust my money would be on its way back to me Smile
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