Is Buying Off-Plan Rental Property A Good Investment?

Growing rates of inflation, higher interest rates and sensationalist headlines are making potential buy-to-let investors wary. The economic repercussions of a global pandemic, political uncertainty, crises like the conflict in the Ukraine, rising energy prices, and inflation that is seemingly spiralling out of control have left many property buyers wondering if buying existing or off-plan property for rental purposes is still worth the investment – especially with the recent return of stamp duty fees and a reduction in tax relief.

Can Rental Property Still Provide a Solid ROI?

Great news for property investors is that buy-to-let homes still have the potential to provide a solid return on investment and off-plan investments are growing in popularity as construction strives to keep up with housing demand. As well as the rental income earned from rental homes, the equity gains from property can be substantial – especially if the property is held for an extended period, or is situated in a high-demand area. Further positive news comes from the fact that new-build price growth outperformed existing homes by 20% last year.

Calculating rental yields is an essential step to determine if the investment will be lucrative. This is done by taking the rental income and dividing it by the value of the property (purchase price, improvement, future renovations) to provide a percentage.

E.g, 

Property purchase cost £250,000

Rental income £1600 a month 

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Rental yield 7.92% (£1600/250000)

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Where To Invest

Monthly rents are on the increase too, offsetting the increased cost of investment. Influxes of people moving to parts of the country have seen huge leaps in average monthly rent costs due to lower available inventory. This provides plenty of options for investors to purchase off-plan investments.

Many employed professionals are returning to cities, having previously relocated due to the COVID-19 pandemic. Cities with a good or growing economy and strong employment are building property fast, especially in central areas. Fantastic options for off-plan property investment are cities like:

• Liverpool

• Manchester

• Birmingham

• Leeds

• Sheffield

Control of assets

Off-plan property investment offers increased control of assets – a huge plus point for investors. Properties can be held long term for large equity gains, or sold quickly for fast profits. For hands-free income, propert management can be handed over to an agent or lettings company for rental properties. Knowing when and where to buy also pays big dividends – local area knowledge can be valuable for investors who want to make good profits, and understanding economic or environmental influences which impact an area can often be leveraged to the investor’s advantage. This is where investing with a property investment company like Redmayne Smith really pays off – we do all of the hard work for you and only provide the most profitable property investment opportunities to our clients.

Final words

The outlook is favourable for those investors seeking to enter the property market or add to their existing portfolio. Property regularly outperforms other types of investment such as stocks or shares and still has the ability to create a solid return for investors, even with the higher taxes and fees. Off-plan property can be even more appealing as it offers investors the chance to purchase below market rates, select a number of units, own in-demand property in highly sought after areas, and maximise rental yields. 

Redmayne Smith are the off-plan experts. We complete painstaking due diligence to only offer our clients the best developments from trustworthy developers and our expert knowledge of the property industry means that your journey to financial freedom through property can be as hands-off as you would like.

Discover more about our fantastic off-plan opportunities here.