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Off-plan property investments in London continue to open lucrative opportunities for portfolio growth. This investment involves buying properties during the planning or development stage. Property owners and investors can expect a strong growth potential thanks to the lower purchase price, strong rental demand and robust capital appreciation.
The question is, why is it a good time to invest in off-plan properties right now?
Market data shows a continuous rise in housing supply and an expected fall in demand as the stamp duty land tax changes. Experts believe this will lower the housing price growth, making property purchases more appealing. With mortgage rates falling from recent peaks, property investors are given more affordable options.
So, if you’re looking to expand your property portfolio, keep reading. This article will explore the opportunities presented by off-plan properties. You’ll get a better idea of why it can lead to your portfolio’s growth. You’ll also get tips to maximise the income potential of your off-plan property investment.
What is an off-plan property?
An off-plan property is a type of property or real estate asset that’s sold before it’s completely built or developed. Usually, investors rely on the building plans, developer specifications and architectural designs to make a buying decision.
Since the property has yet to be completed, the investment is riskier. This is the reason why off-plan properties are sold at below-market prices. There’s a chance the completed version is nothing like the initial plans.
Developers typically release off-plan properties in high-demand areas to make the lower price more appealing to buyers. This, combined with the higher property appreciation in the area, assures investors of a higher growth potential after the property is completed and turned over.
What are the benefits of investing in an off-plan property?
Off-plan properties offer multiple advantages that can lead to incredible portfolio growth. With the right strategy, you can turn this lucrative investment into a high-paying rental property.
Here are the reasons why you should consider it as your next investment as you build a stronger property portfolio.
Lower cost and high capital appreciation
The lower purchase price is the primary advantage of off-plan property investments. The ability to buy a property at a below-market price is especially appealing when it’s in a high-demand area like London. There are even developers who offer discounts and incentives to early birds.
Since the property is bought at a lower price, investors can expect instant capital appreciation as there will be significant growth in property value after completion.
Flexible payment options
Developers offer flexible payment schemes for property buyers. Like most property purchases, a deposit is required (between 10% and 20%). This can also be paid in instalments. The rest of the balance will be spread out, with some payments starting only after the property is completed.
This flexibility allows investors to plan their funding accordingly, making the financial burden easier to bear. Thanks to the potential market and property value growth, the property purchase is deemed more rewarding compared to other investment options.
Better property options
Being one of the first buyers has its perks. You can choose the best units. If you want a higher unit or the one with the best view, you have the first pick.
By buying a property with a great view or layout, you increase the rental appeal of your investment. You can demand a higher rental price, and guests or tenants would be willing to pay it for the best accommodation options.
Warranty coverage and lower maintenance
New build properties come with developer warranties. This can cover structural damages and repairs.
With practically everything in the property new, you don’t have to worry about high maintenance costs. There’s a lower risk of unexpected repairs during the first few years. This means any rental income you earn leads to a higher profit margin and return on investment.
High revenue potential for new-build properties
With all these benefits, you can expect higher revenue potential. There are two ways this can happen.
First, there’s a high demand for new-build properties because of the modern designs, sustainable features and updated amenities. Tenants and guests are assured that the property is compliant with the latest regulations.
Second, the new units have a higher perceived value, so you can charge higher rental fees. The higher occupancy rate and rental fees will increase the property’s profit potential.
Tips to maximise the income potential of off-plan properties
By itself, off-plan properties offer incredible returns on investment. However, you can push that further and maximise the property’s returns and income potential. This requires a strategic approach that starts from the moment of purchase to completion.
Here are tips to ensure a profitable property investment.
Buy in the right location
In any property investment, location will always matter. Make sure your off-plan property is in a good location – especially if you want to use it as a rental unit.
Among the things you should look into are tenant demand, planning infrastructure developments and potential property value growth.
Examples of good locations are those near business districts, universities or transport hubs.
Conduct due diligence
Focus on the developer and research their previous projects. Do they have a record of completed projects? How were the sales? Compare the project plans vs the completed structure.
These will give you insight into whether the developer can deliver on their promise or not. If there’s an offer that’s too good to be true, don’t be too quick to accept. Investigate and do your research. Make sure your investment is in good hands.
Balance the rental demand and market profile
Even if the developer is reputable and trustworthy, don’t commit yet. Analyse the location and check the rental demand and the market profile. Who are the people who will most likely rent the property? Are they young professionals, travellers or students? Can you target families or will you focus on corporate tenants?
Understanding the demand and preferences of the market allows you to choose the best unit to meet their needs.
Partner with a property management company
While the property is still being developed, make plans for how you’ll earn from it. Consider partnering with a reputable property management company. Look for those who offer end-to-end property management services that include housekeeping and maintenance, guest communications, tenant vetting, property compliance, etc.
By working with a professional, you’ll enjoy high occupancy rates and maximum rental returns without worrying about the premium quality of your rental property.
Use a flexible letting strategy
Flexible letting combines short, mid and long-term rental strategies to maximise the earning potential of properties. You’ll enjoy the high nightly rates of short-term letting and the income stability of mid and long-term rentals.
Using this letting approach allows you to switch models to reduce turnover risks and increase rental yields. You can adjust based on seasonality, changing market trends and evolving tenant demands.
Make Your Property Investment Profitable
Investing in an off-plan property in London opens incredible opportunities to increase your portfolio’s growth, but only if you approach it with the right strategy. From getting the right property in a high-demand area to partnering with a property management company, planning every step is crucial to achieve maximum investment returns.
Of course, getting professional help and advice can also help.
At City Relay, we focus on helping property owners optimise their rental income, leading to significant property portfolio growth. Our end-to-end property management package includes an in-house cleaning and maintenance service, guest management and more.
Find out how you can ensure your off-plan property investments are profitable. Contact City Relay so we can customise a property management service that’ll fit your unique portfolio goals.
