Lee Grandin, Managing Director, Landlord Mortgages comments: “We’ve all heard stories in the past about investors who made a lot of money by buying properties off-plan at discounts to market value. But there are many pitfalls to be aware of which can prove costly in today’s market.
“It’s still possible to make money from investing in off-plan properties, but an investment strategy which worked a few years ago will not necessarily deliver the same results today.”
Avoid the pitfalls
Landlord Mortgages offers the following tips:
- Genuine Discount – Only buy off-plan if your own research shows that you are getting a genuine discount on today’s market value.
- Financially Viable – Ensure the deal stacks-up both in terms of the minimum positive net cash flow you are prepared to accept and the maximum amount of capital you are prepared to leave in property.
- Property Sourcing Companies – Avoid them. It’s better to do your own research and create your own deal with the developer.
- Investor Flooding – Avoid developments where a high proportion of plots (30%+) are being sold to investors rather than owner-occupiers. The only thing which will differentiate your property from the one next door will be the price, so you can expect long periods without rent unless you are prepared to drop your rental level.
- Developer Incentives – Some developers can inflate the price and claim to offer incentives such as ‘stamp duty paid’.
- Availability vs Demand – Check thoroughly that there is a rental demand for the type of property you are buying. You could end up with a limited choice of lenders who may not be offering the most competitive rates.
- Limiting the Risk – Many lenders limit the number of buy-to-let mortgages they will offer on a single development.
- Forward Pricing – Developers sometimes anticipate the value of a property at the time of completion and not today. This can work in your favour when the market is rising by more than 25% in a year but at other times investors should be wary.
- Research – Thorough research is crucial. Always do your own research and never rely on what you are told by those with a vested interest.
Landlord Mortgages specialises in providing independent financial advice for buy-to-let investors and with over 31,000 landlords on their books boasts a substantial market share in this fast growing sector.
For further information on Landlord Mortgages, investors can visit www.lml.co.uk or phone 0800 917 3324.
* Buying a property off-plan is when you purchase a new-build property, often more than a year before it is built and completed, hence the term ‘buying off-plan’.
