Investing in Off-Plan Property Abroad

There are many benefits to buying property off-plan in the UK, particularly for investors building a property portfolio. Here are some tips on how to do it the right way. 

Why invest in an off-plan property development rather than investing in something that can offer immediate returns is a question asked by many potential investors. If you’re in it for the long-term, off-plan investment has some unique benefits. Typically purchased in the construction part of the building process, buying off-plan is a great way for investors to purchase property at a discounted price. 

A key benefit of purchasing a property off-plan is that you’re buying at today’s value and only start paying for it once the development is complete. There is potential for surrounding property prices to rise, so you benefit from capital appreciation on the property while it is being built resulting in clear returns for the investor.  

Another reason why investors buy off-plan is because they get a multiple on the uplift. Take an example of a £250 000 apartment. If you buy upfront, you pay the whole £250 000. If you buy off-plan you can put down 20% for the first two years while it’s being built – that’s £50 000 for the first two years. If the value increases by 10% during the build period, that’s a £25 000 uplift and a 50% return on your £50 000 deposit.  

Buying off-plan also means you’re getting a brand-new apartment in a brand-new building with a 10-year build warranty. A new-build unit is always preferable in the rental market and owners can demand a slightly higher rental than older developments. Choosing an off-plan investment also usually means having your pick of the bunch when it comes to specifications, which helps in your investment strategy if you’re wanting to hold a variety of property types.  

As with any investment asset, you’ve actually got to have the money and it’s important to mitigate potential risks. 

Here is some advice on purchasing an international property: 

You need to be in it for the long-term 

In addition to mortgage fees, there are other substantial costs when buying a property, such as stamp duty and legal fees, so this is no short-term investment if you want to recoup those expenses, says Scott Irving, General Manager Carrick Property. “The longer you are prepared to wait, the more meaningful your return will be. We advise clients to sit tight for 10 to 20 years.” 

Timing is crucial  

As any property investment expert will tell you, it’s not about timing the market; it’s time in the market. Your strategy should be long-term regardless of whether you buy at the top or the bottom of the market. Some people choose to sell the property once it’s completed gaining the immediate benefit of any capital growth that has occurred during the build process. Other investors may choose to rent out the property, achieving higher rental yields and creating sustainable capital growth over many years. Selling off-plan property before completion is also an option for some investors, but it does come with its own risks. Ultimately if you’re in the property market to make money, you should consider this a long-term investment.  

Location is key  

If you want to stimulate growth within your purchase, it’s all about location. You should also look out for regional regeneration plans which can make transformational changes to your investment surroundings and boost value. Consider potential rental yields if you’re making a buy to let investment. It’s all about sustainable tenant demand, not just now, but in the next 25 years.  

Do your research 

Make sure you’re working with a reputable firm with a strong track record. They should ensure that due diligence is done on your behalf by researching the location, the rental demand, the developer and the development itself.  

Don’t let emotion rule 

If you’re investing in a buy-to-let, remind yourself that it’s exactly that – a place you are buying to rent out; not a place you are planning to live in. Be practical when deciding on a purchase: Where is the demand? Are there tenants like young professionals or students  that will pay your mortgage? Is the area undergoing regeneration? Where is the job creation? What is expected in terms of future values and demand? 

Ultimately, the best strategy to ensure profit is time and tenant demand. “The longer you’re in, the more profit you’ll make,” says Irving. “And with a constant supply of quality tenants, you’re on the path to building a successful retirement nest egg.”