All you ever needed to know about buying off-plan

With Yolanda Jacob, Head of Sales at Berkeley St Edward

Buying off-plan can provide a simple and sustainable solution for investors, particularly when capital growth can be achieved buying into areas where prices are set to rise during build. Getting started doesn’t require deep pockets or expert knowledge. Here we have answered the most common questions first time property investors should consider when buying off-plan for the first time. 

What does buying off-plan involve?

The above may seem like an obvious question to ask, but buying off-plan can sound mysterious and elusive. In simple terms, it involves purchasing a property before it has been built, but where a developer has been granted permission, whether houses or apartments or both. Investors are able to make an informed and educated choice based on high quality visuals and models, providing the most realistic indication of how the development, community and residence, will look and feel. 

For developers such as Berkeley, technology is playing a huge part in making this experience as accurate and realistic as possible, particularly during the pandemic.

Yolanda Jacob, Head of Sales at Berkeley St Edward said, “Berkeley has a reputable track record of selling pre-completion across our portfolio, and we pride ourselves in providing an immersive approach to showcasing our vision for a development for investors buying off-plan. Seasoned buyers can be assured simply by CGI’s, specifications and floorplans, but first-time buyers often need a more considered and thoughtful approach to instil confidence, and importantly excitement! That’s why we’ve really embraced technology to offer virtual viewings, video walk throughs and high specification show apartments that truly enable people to experience what the property will look and feel like. Our buyers value the sensory experience we are able to provide, supporting the more practical assessment of a potential purchase.” 

How much will I need to pay, and when?

This is where buying off-plan can become attractive for investors, as buying at such an early stage means the financial outlay is spread across several years and therefore can help in managing cash-flow.

Once a property has been chosen and a price agreed, it will be taken off the market upon being financially qualified by the developer and payment of a ‘Reservation Fee’. For example, for Eden Grove in Staines-Upon-Thames the Reservation Fee is a flat £2,000.00 for the one, two and three bedroom apartments and penthouses currently on the market. 

After around 21-28 days of the Reservation Fee being paid you can expect to ‘Exchange Contracts’. This is an important stage, as from this point onwards the agreement is legally binding and typically requires buyers to put down a deposit, normally 10% of the property value e.g. a two bedroom apartment at Eden Grove in Staines-Upon-Thames on the market for £495,000.00 would require a deposit of £49,500.00 in order to Exchange contracts. 

Depending on how far off-plan the property is, which could be four or five years, additional payment may be requested by the developer prior to build completion, and would be disclosed when the Reservation Fee is paid. The remainder of the completion funds would be paid upon build completion and this when the legal ownership of the property is transferred to the buyer. For completion, investors have two options, either complete as a cash transaction, or secure a mortgage as with a standard house purchase.

Yolanda said, “Being able to spread the cost of purchasing a property, and manage cash flow is a huge draw for investors to buy off-plan. We always advise buyers to seek financial advice when approaching a purchase, but knowing the balance owned doesn’t need to be paid for several years can enable other investments in a portfolio to be managed accordingly to support sustainable capital growth. For investors who want to benefit from capital growth between exchange and completion, contracts at Eden Grove come with one assignability clause meaning you can transfer the rights and obligations of the purchase prior to completion.”

How does the process of applying for a mortgage differ?

This is where first-time investors can be caught out. Unlike purchasing a property with intent to occupy, it is essential a mortgage provider is aware that the property being considered is being bought off-plan. This is because most mortgage offers last only three to nine months and if completion won’t occur for several years, the offer will no longer be valid and can cause problems down the line. It is recommended that a financial adviser be consulted at this stage, who will be able to provide the best advice on financing options suitable for buying off-plan in the early stages based on each buyer’s circumstances. 

When can a property be marketed for rental?

Capital growth and strong rental yields are two of the main reasons why property continues to be a popular investment route. Where investors are intent on securing a rental income, it is possible to put a property on the market around three months before completion when they become the legal owner. That way, first-time landlords can be assured of income as soon they get the keys. 

Yolanda said, “We understand securing the right tenant to move in straight away is incredibly important, and that’s why we foster strong links with local rental agents to ensure we can be as helpful as possible. Local agents in Staines-Upon-Thames are really excited about Eden Grove helping to provide the supply of high quality and beautifully presented rental properties in an area being snapped up by Londoners seeking a riverside lifestyle in the heart of Surrey.”

When is the earliest I could put the property on the market?

It isn’t often that an investment can provide guaranteed capital growth, but it is part of the attractiveness of buying off-plan, particularly when a scheme offers the chance to purchase in an area where prices are set to rise. It is therefore not uncommon for a property to be worth more on completion, enabling investors to sell and make a good return with minimal hassle.

At the point of completion, and once the buyer is the legal owner, the property can be put on the market as soon as desired to unlock the capital growth. 

Eden Groves’ Sales & Marketing Suite is now open, and the brand new Show Apartment will launch 27 & 28 March 2021, in accordance with government guidelines.

To book an appointment or virtual viewing, please contact our sales team today on 01784 817 609 or visit www.edengrove-londonroad.co.uk

The Sales & Marketing Suite is open daily 10am – 6pm, 10am – 8pm on Thursdays – by appointment only.

17-51 London Road, Staines-upon-Thames, Surrey TW18 4AE

About Berkeley Group

Berkeley Group builds beautiful, successful places, blending homes, parks and public realm with great facilities to create fantastic communities where people love to live. We work together with trusted partners to tackle the shortage of good quality homes. And we make a lasting contribution to the landscape and to the communities we help create. We have built more than 19,200 homes in the last five years, across London, Birmingham and the South of England.

About Yolanda Jacob

Yolanda Jacob, Head of Sales at Berkeley St Edward has worked in the property industry for nearly 10 years, starting out at a small Estate Agency in South West London going on to develop her career at two of the country’s largest developers working across London and the outer London regions.  Yolanda has had a large focus on the international markets buying in the UK and is experienced in dealing with a wealth of clients including seasoned investors to first time landlords.  In addition to this, Yolanda has managed numerous developments popular with first time buyers and owner occupiers where customer service is at the forefront of the sales process. 

This article is sponsored by Berkeley Group.