Should You Purchase A Development Before Construction?

Investing Off-Plan is an increasingly popular option and with good reason. The security of paying a fixed price for your new property without paying more when the cost of materials increases is understandably enticing. However, perceptions that untrustworthy developers use this method to scam investors out of their money mean that many investors choose already-built, potentially less lucrative properties.

How Do You Choose A Reliable Developer?

Due diligence is essential for any investment – particularly of this magnitude.

But what should you be concerned about?

  • Planning Permission

You can search whether a developer has planning permission for the build on the government’s website

On entering the correct postcode, this will provide a link to the relevant local council’s website.

There, you can typically search planning applications and documents by using the application reference number, address, postcode or even through a map, thus enabling you to see the details of the application and decision.

  • Is The Development Fully Funded?

It is vital that you know how the development is funded (before purchasing an Off-Plan Property) in order to ascertain your level of risk. There are two typical funding models common for Off-Plan Developments.

Forward Funded

This is the lower-risk and more secure option because the whole build is fully-funded. In addition to already having the finances in place, being funded by a professional institute means that the project has been thoroughly scrutinised and determined to be viable.

Fractionally Funded

Customers are often given higher incentives and lower purchase prices with this model because they are undertaking higher risk because the developer is relying on client deposits to finance the construction.

Whilst the lower starting price makes larger financial returns possible builds could be delayed or not go ahead at all if they fail to secure enough investors.

  • Is Your Deposit Protected?

Nobody wants to lose money if the build doesn’t go to plan. We recommend only choosing developments where your reservation fee/deposit is kept in a secure client account or is fully insured.

  • What Is The Developer’s Track Record?

Chances are that you will buy the development through an agent.

Find out who the developer is:

  • How many developments have they completed?
  • Are they the standard and specification that you would expect?
  • Are their completion dates usually accurate?
  • Are there any news stories about incomplete developments?
  • Who is the contractor that they are using? Do they have experience of build quality?

How Does Redmayne Smith Ensure The Best Developments For Our Clients?

All developments that we put forward to our clients are subjected to a rigorous, 31-stage due diligence process. Including, amongst other criteria:

  • Proof of ownership/title deeds
  • Planning permission
  • Fully funded
  • Developer and construction company track record
  • Length of lease
  • Ground rent
  • Favourable payment terms
  • Local area research
  • Capital appreciation comparables
  • Rental comparables
  • Rental and capital appreciation forecasts
  • Net Yield estimations

Case Study: Lockside Wharf

Take our 28 Lockside Wharf investors, for example. 

They were recently thrilled to discover that their investment has won 3 prestigious prizes from The UK Property Awards:

  1. Best Residential Development 20+Units West Midlands
  2. Best Architecture Multiple Residence West Midlands
  3. Best Architecture Multiple Residence United Kingdom

Redmayne Smith ensure that our clients get the absolute best investments, regardless of how far along the construction process is. 

To ensure that you get expert support in your property investment journey, schedule a consultation with one of our team today.

Amy Boutle

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