General (main property discussion here) - Buying Off Plan

Has anyone done this?

I have seen a few opportunities on this site, some with great discounts.

In you experience have you found the prices to be realistic and not just bumped up to make the discounts look better?

I looked into this too, theres deals all over the place for off-plan, but i found without a big deposit, the rent just wouldnt stack up.

If you pay no deposit, and the guy who buys the apartment next door puts down a nice deposit, he can charge less rent, so his will be filled, yours will be empty, as you need to cover �1500 a month for example.

Avoid companies like Chellenor.

Matt

Well I was more interested in the instant equity part. For just a few grand deposit you are getting a flat with a 15% or more discount. Thats my real motivation, and I think for others too, with off plan. I hope someone can post their experiences.

Be very wary of anything that seems too good to be true, 15% discount, great, but 15% of what. Due diligence is of paramount importance, check that all prices quoted stack up for the area and also check market rental values for the area. I'm not saying that all advertised deals are duff I am just advising you to check and check thoroughly before commiting your cash. Take it from someone who's been there and learned the hard way! Nuff said.

John

I should add that my previous bad experience has not been with anything nor anyone connected with this site.

John

Thanks John

completely agree with john - be prudent and really do your research. it is easy to get carried away with discounts etc.

thats not to say that there are not good deals to be had!

tom

Tom

Should I search for comparable properties in the local area, comparing rents and sales prices etc?

Also, when I put down my deposit, when do I start paying the mortgage and when do I apply for a mortgage?

Frank, the big unknown (imo) is the rentability and market level of rents. If the development is huge, and you get a bunch of LLs all looking for tenants at the same time, you could start off with voids. If the market level of rent isn't covering the mortgage, you've got to consider how long you're willing to sustain -ve cash flow too.

Part of my judgement of an area comes down to the local amenities and community around. A lot of properties seem to have been built recently, and as a long term punt I'd want to see that there are the schools, doctors, parks, suprmarkets to make it a nice place to live! Sounds basic, and don't mean to patronise, but I've got a feeling a bunch of the docklands places are too sterile for long term success.

Just my 2d

John

Hi John

Thanks for the advice. I am really interested in making a quick buck by selling after it is built as I want to be able to raise capital for rental properties. Have you ever done this?

If anyone on this site has please let me know.

Well, if there's such a secondary market then why are they still for sale, if you see what I mean?

In order to "flip" successfully, you'd have to be in on a great deal that isn't open to others. Then sell on to the next guy for whom the property is worth more to.

Do you have some idea of an oulet for the offplan once it is complete?

Do you think you are good at finding great tenants, etc, and could put it up on the tenanted boards for sale here?

Just playing devils advocate Frank, but in general I like to work out exactly where I am best at adding value to a deal and then concentrating on that (I'd hate you to be stuck with an offplan you didn't want).

John

Frank, I bought a property off plan about a year ago. At the time the promise of discount and all the other "perks" looked so good that I wanted to buy 2. One to keep and one to sell off to generate a capital. But I couldnt afford the costs etc for 2 so only bought the 1.

I'm sure there were others thinking like me too. I had no tenants for about 4 months, as all the flats were being marketted at around the same time. And when I had the property valued on completion, it had not gone up by 15%.In order to make the 15% that I wanted to originally, I would have had to wait for over a year.

I think this kind of thing was very lucrative a while ago, because people were reluctant to buy something unknown. So the builders probably gave discounts to lure them into it. But now its not the case.

This is of course from my limited experience. If you can afford to pay the mortgage initially and are able to sit on the property then its worth. I dont regret buying my one, but I think 2 would have been a burden. Hope this helps.

John thanks for your advice. And to be honest I am not in the position to be able to pay the mortgage for any vacant amount of time.

Aarti, same to you. Thanks and I agree the market has changed and therefore so has the rewards and pitfalls. So you really do not regret buying your off plan?

Could either of you tell me. When does the mortgage application and payments start? Say I put a deposit down on a £100,000 flat in January and it was completed in July. What happens?

aarti - thanks for sharing the experience. real experience really makes a difference. i haven't made the jump into off-plan yet so thanks for shedding light on it.

to answer frank's question - i would look at the investment in the same way as any other investment (for those that don't visit regularly on this forum i have stuck to my guns up to now only investing in tenanted property).

i would look at comparable rents and sales prices etc except heres the difference...... with most off-plan developments many flats flood to the market at the same and as with all things - increased supply generally leads to reduced prices so i would factor in a discount on the rent you are told you will achieve perhaps 10-15%. also expect it to take longer to let out because of the likely over-supply.

however, over the longer term, the supply-demand equation will go back to normal levels and hopefully you will see better capital growth as people usually prefer nice new flats to shabby old ones.

well thats my thoughts.

tom

Hi Tim

Thanks for that, I will keep that in mind.

Also you posted that you only bought tenanted properties. Has this been successful so far?

Oops that should be "Hi Tom".

Frank,

The mortgage payment will only start to come out of your account when they have forwarded the money to the builder.

So you will only start paying your mortgage when you actually have the property and even then the first payment will be a month later, so you will probably have a month to find a tenant in this time.

This was my experience last year when I bought a new off plan apartment. I paid the deposit 28 days after reserving the property in May, June then when the property was finished 6 months later, I completed and the mortgage company paid up the remaining funds, Xmas Eve in fact. I then paid my first mortgage payment in January around the 23rd or 24th.

Hope this helps?

Regards

Simon

Frank,

As Simon says above, the mortgage payments start to come out on completion. Until then you dont pay anything.

Most places will reserve a plot for you for a fixed amount of between £500 - £1000. You then exchange and pay the deposit within 28days. If you are in a position to exchange sooner then you can use that as a bargaining chip.

One thing you have to account for is the flooring. Most off plan properties do not have flooring put in. So you have to have that done at your expense. When I bought, I thought that since the flat is new, I might as well market it as a "luxury" appartment. So, for that I put laminate in the hallway and lounge, tiled the kitchen and bathroom, carpetted the bedrooms, changed the lightfittings (as those supplied by the builder are not luxury!) etc. All these costs add up as well. But then, between exchange and completion you have about 6 months to save up for these additional costs. So depending on your cash flow, it may or may not be a burden.

No, I dont regret buying off plan. I think if I'd bought a normal property, it probably would have cost me something similar. Atleast this is new, and I know that I'm not going to get any nasty surprises in terms or repair work etc. And professional tenants are willing to pay a bit extra for a new, clean place.

Thanks for that Simon and Aarti.

Aarti I did not know that there is a chance that they could come with no flooring, is that common practise? I would have thought that they were finished to the degree of the show property that you are presented with?

And you did make a very good point about nasty surprised. I suppose you do not need to pay for a survey as the property is brand new. Thanks for that.

Hi Frank,

No problem.

The off plan I bought did come with floor and everything, there was no extras to pay really. I chose the normal fittings, as in laminate flooring and carpet they had to offer.

Anything else would have been extra to pay such as dishwasher etc, but I didnt bother.

Cheers

Simon

Frank, My property was built by Fairview, and they dont provide flooring. I know some other builders dont provide either, but maybe there are some that do. You'd have to check with the builder when u buy.

I cant remember if I paid for the survey or not. A friend bought one recently, and she had to pay for a survery. Again I think it probably varies.

Aarti