Even though buying off-the-plan properties is becoming more and more common, it's important to understand the risks associated with them. This blog will explain what makes specific developments more or less risky so that you can decide on an off-plan purchase with greater knowledge.
So, to begin with, should you make an investment in a property where building has not yet begun?
This is defiantly something to explore extensively, that is for sure. Before considering buying an off-plan property, property investors should go through the following checklist of questions and make sure they are familiar with the answers and the overall risk.
Following this checklist will help you to gain a wider understanding of the potential risks surrounding off plan property investment. The importance of each of these areas are detrimental to your investment planning. Read more below.
Key Phrase Bank
means that the development has been funded by professional institutes prior to the build. Highlighting their trust in the constructors and developers, providing a lessened risk factor.
This states that the developer relies on investor deposits to fund the construction and so, set targets will need to be met before construction begins. However, the risk attributed to these surrounds delays due to waiting for targets to be met.
Units are sold before the construction is initiated, why?
Before beginning construction on a site, developers occasionally need to sell a particular number of properties. This is frequently the case when a developer uses deposits to pay for the development's construction. These types of developments frequently require the sale of a sizable percentage of the units, and they are frequently heavily incentivised (through furniture packages etc.). In rare circumstances, sites may demand that up to 75% of the units be sold before construction can begin. With reliance's such as these, it becomes evident that delays may arise. Taking into account the worlds current climate and whether targets are met will help predict this also. In more extreme cases this may result in the development not being built at all, this highlighting the risk level of these developments further.
The Importance of Planning
Although planning is definitely necessary before starting the approval process for the majority of traditional property investments, it is nevertheless important to ensure that they have the required planning permission also. Planning applications are always accessible to the general public online. Visit the government website and use the 'register of planning decisions' to look up a planning application. You can find out which local council it pertains to and access a connection to their website after entering the correct postcode. You may often search for planning applications and documentation on the council website using the application reference number provided, address, postcode, or even a map. This will enable you to access the application's and decision's details once you have located the relevant application.
Constuction has stopped, what steps should I take?
A variety of factors, including a lack of funding, an increase in material costs, and disruptions to supply networks, can cause property developments to be postponed. It's crucial to read the contract's fine print and conditions. A long stop date, which is the agreed-upon deadline for the property to be finished, will typically be written at this point. Buyers who still haven't been able to move into their newly constructed homes after that date might be eligible to receive their deposits back and, if they so want, cancel the contract. For the most part, the best option to get your money returned will need you to see a skilled solicitor. The long stop date may also be extended at your discretion. Sometimes events take place outside of a development's control. A condition for force majeure is applicable in this situation. This provision in a contract modifies the parties' obligations and liabilities in the event of an unforeseen, extraordinary event. Here legal advice is recommended again.
LPC’s Guide to Identifying Trusted Construction Contractors
If you're thinking about purchasing an off-the-plan property, make sure the construction completed by a reputable contractor. Verify their track record for timely completion of previous developments as well as the construction of high-quality properties. Make sure they are not overly ambitious with time frames and that they have the resources necessary to complete the build. Here at LPC Invest we ONLY work alongside award winning, trusted developers and contractors to provide our investors with as little risk exposure as possible. Following the above checklist will allow for you to ensure the upmost levels of security and achieve peace of mind throughout your property investment journey.