Welcome! Use the popout menu < left to explore the site. You are welcome to join the Forums to chat. Off Plan Property investmentsHave you been offered an Off Plan deal or thinking about it? You MUST read all of this section before you do any Off Plan investing. I cover how they work, the major pitfalls and specific deal examples of my own that went horribly wrong. Please don't get caught up in the seminar hype and make the same mistakes that I did. Read it all by scrolling, or jump to sections here:
1 – The “Team” involved in a deal – and how the team work to get the sale through. Supplier, Developer, Estate Agent, Letting Agent, Broker / Solicitor, Valuer. Although all these guys are mostly independant of each other - they all have one thing in common - they make money out of you. With the Off Plan deal offering clubs / seminars and systems, they often have some kind of connection financially (eg the finder may get referral fee for the mortgage broker). I'm going to talk you through each character and what they gain by the deal. The Supplier/Finder - Often sends you to a broker & solicitor to make sure the deal goes smoothly, could be earning fees from this. It is in his interest to get the whole deal going so that he gets his finders fee / commission. Sometimes offered a good deal on a plot himself – may tell you he has invested there …… yet consider that all his finders fees could pay for his property in cash – and he has no real exposure risk. The Developer - Wants to sell the property – if the supplier has negotiated it to be no money down, he needs to tread carefully, feeds the supplier info he wants, “fluffs” the valuer and tells the Estate Agent how much they are worth Estate Agent - My experience of lunching with some of the agents has given me a bit of incite. As an agent, they are usually the 1st people on the scene when the developer puts his offerings out. They do a preliminary valuation and they also get offered good deals to sell the development. They can set the value at whatever they want …. And whatever they are asked to do really. They also may like the second bite at the cherry if you want to sell it on BUT be warned, they often can not sell any on untill the whole development has been sold. The Letting Agent - Agents “have” (and I know one personally) in the past been offered incentives by the suppliers to say that the rent is X amount (the figure needed by the lender to lend on the property). So even tho they may “know” that the rent could be £750 – they would say £1000 – just to get the development on their books. The Valuer - Well this poor guy has not got a chance! Letting agent tells him what the supplier wants them to hear. The estate agent has been told by the developer what they are worth … and more often that not there are no comparables to go on. You can't say that 100 investors paying X are comparables – because they are a unique market, and caught up in clever marketing. He also has to get his paid by the lender … and the lender is not likely to use him if they can never get a mortgage through. Discounts - and how they workHow is a discount measured? Personal experience and a lot of “lunches” tell me that the MORE money you invest, the more the developer will take you serious, and will share the profits with you. If you expect to get something low risk .. for nothing then you are likely to get shafted. I did! So most people offer say 15 – 20% discount ……. But do they? What is the discount based on? Where did they get the initial price (the estate agent? come on you just read about him) Is the deal structured as a no money down …. So just an easy buy, and not a genuine discount. Consider – not investing 15% like you should – makes you high risk. No breathing space. Sales Tactics Points to watch when being offered a deal – Sales Tactics Discount I have bought one myself Package – No Hassle Discount / Small Deposit HMMM .. discounted from what exactly?
In my experience
2 – Research before you take a deal Demand – rental / sales
Total number of units - DEMAND How many are going to investors – DEMAND Comparable PPSF (price per square foot) What are the specific Specs – get makes / models in writing (makes difference to value) 3 – “off my plan” 4 – Pitfall Overview / Snagging 5 – Prevention Tips: Don’t rent to a purchaser without a tenancy agreement Don’t believe selling agents when a property finder has a lot of properties with them. Ignore the words 15% discount – it is made up. Check the redemption BEFORE exchange of contracts. Don’t complete without snagging / inspecting Check policy on crack sizes (they do have them) Get release phase and any permission for viewing / use of property in writing. Remember the price people will pay is current market value. Confirm how the developer is helping you to complete (gifted deposit etc). Be prepared for early or late completion. Get the notice period of completion written into exchange of contracts. Avoid Christmas completions for back to backs – there are no buyers around Check resale rules on the development NEVER complete without an inspection Check with land registry that you have been registered if you are wanting to resale fast to avoid delays. Don’t trust 6 months up front tenants (this is the 2 nd one I had problems with)
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