So here you are, thinking of entering the property market and undecided as to what part of it to tackle. To help you make up your mind New Build Sales have put together some valuable information around off-plan property and new-build opportunities which makes for essential reading before you take the plunge in to the world of property investment.
The first point to consider is do you want to invest in new-build or existing, older property.
For many investors new build properties have so much going for them that you may decide there is no need to look elsewhere. To get some additional information you should read this.
Consider the facts: new-build properties are nearly always so much more energy efficient and therefore a great deal more economical to run than older properties; you will almost certainly be offered structural and other contractor guarantees; such properties will, in most instances, complement contemporary lifestyles – and it will not be necessary to spend both time and, more importantly, money, on decorating, refurbishment and repairs!
You will also find that there is a great variety of properties on the market so that there will be something to suit your tastes and/or requirements.
Off-plan and new-build investments
Convinced? Then it’s time to take a look at two options with regard to your purchase.
Is it better to buy before the first brick has been laid – known as “off-plan” – or wait until the property has been built and you can therefore see exactly what you will be getting for your money?
Let us consider the opportunities associated with buying off-plan property, which, it has to be said, is becoming increasingly common with many investors.
One of the advantages with buying off-plan is that that you, as the purchaser, will find that you will be given a significant reduction off the current market price.
Indeed, if things go well for you and market values go up, by the time the property is actually built, its value may already have increased.
It is important to bear in mind, however, that it is also possible that property prices may fall in the interim, so you should also take this scenario in to account when preparing your investment plan.
In some instances, if you make your move right at the start, you may be able to choose fittings such as flooring, bathroom tiles and various appliances.
The disadvantages of buying off-plan
All very well, you might say, but surely not everything in the garden is lovely; there must be draw-backs to the off-plan approach. And you are right.
One of the disadvantages to buying off-plan is that your new property may not turn out quite as you had visualised it.
It is all very well seeing plans and detailed specifications, but it is not the same as seeing the finished product.
One of the more common disappointments is that rooms are not as big as purchasers thought they would be.
There is also, quite often, not quite as much space between your property and the other properties on the site as you had been led to believe.
It will often pay you in the long term to make some extensive enquiries before you commit yourself to any binding contracts with builders or developers.
For example, see if it is possible to inspect homes that the developers have built elsewhere and talk to previous investors/property owners.
You can glean valuable information from them about how things went, whether there were any unexpected surprises, how responsive the developer and his team were to problems etc.
You should also look to investigate the reputation and financial stability of the developer/contractor, look at the validity of any guarantees offered, the proposed construction programme and key dates for completion, financials and phased payment dates etc.
At this stage you may wish to consider getting professional advice from someone who can help you with your due diligence investigations.
This could be even more important when considering overseas property and off-plan developments where you may not speak the local language and are less familiar with the legal processes involved.
If your property forms part of a larger development you should also have a good look round the site where your property is to be built and satisfy yourself that everything is being properly run.
The buying process
Having decided that all is in order with both the developer and his plans then you need to familiarise yourself with the property purchase process.
What usually happens is that you will be asked to reserve your property by paying a reservation fee, which becomes part of the deposit; then there will be an exchange of contracts, when a further deposit will be required.
After this stage you would normally need to wait for the construction work to complete – a stage commonly known as “build completion”, and that is followed by legal completion, which involves paying the balance of the purchase price.
When all this has been correctly completed the property is legally yours and you are free to move in.
How long will it take?
A question that most investors and property purchasers ask is: how long will all this take?
It is not, of course, possible to be precise because there are so many factors to take into consideration, not least the weather, but when you reserve the property you will be given some idea of when your new property is likely to be completed.
To get a better understanding of this part of the process it is often helpful to ask the developer for a detailed programme of works that will identify key dates along the way, including build completion.
With this detailed programme you will be able to track the developers progress against his plan and quickly identify any delays or problems.
Buying new-build property
Right then, what about the purchase of a new-build property that has recently been constructed?
As we have already stated, the big advantage to buying new-build property is that you can see it, physically touch it and inspect it for defects.
The big disadvantage is that it will almost certainly cost you more than if you had purchased off-plan, although there may be some room for negotiation on the price.
Remember, you have nothing to lose by haggling over the advertised price – and maybe quite a bit to gain.
If the time is right you may also be able to cash in on various incentives on offer from the developer, sometimes because properties are not selling all that well, sometimes because it is the end of the developer’s financial year and targets have to be met.
It is always good to ask about purchaser incentives as they may not be openly advertised, and could include furnishing packages, appliances, legal fees, no deposit etc. and these are a great way of reducing your overall acquisition costs.
For owner-occupiers you may also find that there is a part-exchange facility on offer, so that, if you are not a first-time buyer, you can sell your existing property to the developers and therefore avoid all the hassle, and possibly frustrating delays, of selling on the open market.
If you are lucky you might even receive a discount on the property you are buying.
Always make sure, however, that you get a fair price for your own property by seeking a number of independent valuations.
Flipping a Contract before completion
Many developers will not allow this as they use the standard condition of sales contract 5th edition, whereby ‘clause 1.5 Assignment and sub-sales’, prohibits the transfer of contract.
This clause simply makes the point that the buyer is not entitled to transfer the benefit of the contract, i.e. after exchange of contracts the buyer named in the contract cannot nominate another buyer to take his place.
If you intend to flip a contract before completion to cash out before completion, you will need to have special contracts that allow this. although this is becoming increasing common for investors to flip contract 6m to 18m after exchange; making returns of up to 100% without ever paying stamp duty. It is usually only offered to VIP investors or to buying agents such as us; so do check with your solicitor first if this is allowed.
It can be an extremely lucrative strategy but can not not without its risks as markets can go down leaving you stuck if you do not have funds to complete. For more info you can call one of our consultants that can advise you better of the contingencies you can have in place and what development we currently have that allow contract assignments and have equity already built in before exploring this as a strategy. www.newbuildsales.co.uk
What’s included in the price?
As for your new property, be clear in your own mind as to what is included in the purchase price because developers do vary quite significantly in what they provide.
Ask for a schedule of what is to be included in the price and what is excluded… don’t get stung by some hidden add-ons that you were not made aware of.
Property inspections and guarantees
Make a thorough inspection of the property before committing yourself to any payment, looking for any defects that there might be and preparing a detailed list that can be given to the builder.
You should also check that your property is covered by a structural warranty from a reputable provider such as the National House Building Council (NHBC).
Finally, as with any property purchase, it is always advisable to seek professional advice, in this case either from a solicitor or licensed conveyancer experienced in the off-plan and new-build market, and possibly a qualified construction specialist or surveyor.
For more info on buying offplan and new builds , visit our Site www.newbuildsales.co.uk