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.
Due diligence is essential for any investment – particularly of this magnitude.
But what should you be concerned about?
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.
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.
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.
Chances are that you will buy the development through an agent.
Find out who the developer is:
All developments that we put forward to our clients are subjected to a rigorous, 31-stage due diligence process. Including, amongst other criteria:
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:
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.