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What Are the Pros and Cons of Off-Plan Property Investment?

⏱️ 10 Minute Read

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the grand exchange

Property investment can be as overwhelming as it is exciting, with there being so many factors to consider. From choosing your investment location to the different property types and investment strategies out there, not to mention the process itself, there’s a lot to consider. But, like all investments, research is the key to navigating your way through your investment journey. 


In the early stages, researching the avenues within property investment and how they fit your strategy should be a priority. After that, the rest will come naturally. While many investors will assume that their main decision will be choosing between completed houses and apartments, Off-Plan property investment is often overlooked.


🏢 But what is Off-Plan property?

In a nutshell, Off-Plan property investment involves purchasing a property – typically an apartment – before or while it is still being built. Having your money tied up during the build phase isn’t for everyone, but it is this period that makes Off-Plan unique as it gives your asset the opportunity to grow in value – thus deliver a capital return against the price you originally agreed before it even completes. 

Of course, there’s much more to it, but according to property developer, SevenCapital, these are the pros (and cons) of investing in Off-Plan property:


✅ Pros of Off-Plan Property

Money is at the root of all investments, so naturally, the financial benefits of buying Off-Plan are at the top of the list. Marketed before – or during – construction, property purchased Off-Plan is typically more affordable than completed property. 

While this is a pro in itself, the lack of immediacy surrounding rental income is sometimes enough to put investors off. For the majority of Off-Plan developments, the completion time is around two years, meaning that in this sense, buying completed property has more short-term benefits than buying Off-Plan. 


But this doesn’t necessarily mean your investment won’t be making money in the short term. It all comes down to your short-term priorities; rental income, or capital growth. 


In the time it takes for your property to complete, it’s likely that the area and local market will have undergone some form of growth – which will have been a key consideration in your decision to invest Off-Plan in that area. In turn, this will encourage natural capital growth within your Off-Plan property investment. So, when your property eventually completes, there’s potential for it to not only be worth more than your purchase price but also more chance of getting a higher rental income upon completion. 


This can be a recipe for success when you combine it with an emerging location. Many UK towns are in the middle of undergoing regeneration schemes and these local markets are expecting major growth. 


Bracknell is a prime example of this, with the £770 million Bracknell Vision project bringing the town new amenities, employment opportunities, and rising property prices. With the potential to see 17.5% growth by 2025, buying property Off-Plan sooner rather than later in Bracknell could mean greater rates of return. 


On top of your financial returns, you’ll have a shiny new property when you buy Off-Plan. With it being freshly built, you’ll not only be getting new features and fittings, but it’s likely that all appliances will be some of the best on the market. And while you won’t directly feel the benefit of these, they are an additional luxury that will appeal to tenants. 


Choosing Off-Plan property also means an extra level of diversity within your investment portfolio. Whether you have multiple properties or a range of other investment vehicles, buying Off-Plan adds more variety, and potential, to your portfolio. This is key to investing – a diverse portfolio reduces risk while optimising your profits. 


❌ Cons of Off-Plan Property

If you ask anyone about Off-Plan property, a common response is that it’s much riskier than completed property – it’s almost a reflex for some investors. All investments come with their risks and while there are uncertainties that come with buying Off-Plan property, they’re nothing due diligence can’t help to clarify. 


The major worry with Off-Plan property investment is whether or not the development will actually complete. As you’re investing pre- or during-build this is an inevitable risk, but this is what makes research so important. 


A big part of your research should be into your property developer. Look for testimonials, a consistent track record, and accurate completion times. If a developer has all of these things, along with quality builds, the risks of buying Off-Plan are minimised. 


As we briefly touched on, one of the most obvious cons of Off-Plan developments is the completion time. Although your property will be making money, you won’t be able to touch this until the development has completed. Whereas investing in completed property means you can begin receiving a passive income as soon as it’s rented out. 


But, is this really a con? As we all know, property is most lucrative on a long-term basis, so if you’re in it for the long run, this is a small sacrifice to make for more potential growth later down the line. 


Mortgages can be a sticky situation with any property investment, but some lenders can be cautious when it comes to Off-Plan property. The different considerations that come with this investment type are also risks for lenders. That said, there are plenty of opportunities to access Buy-to-Let mortgages with specialist lenders within the industry and this should form part of your research.


There is also an element of entering the unknown with Off-Plan property investment. As we have seen in the past 12 months, both the economy and the property market can change within a matter of days. This means that when you decide to sign on the dotted line, the property market could be completely different when it actually comes to renting your property out.


While this could mean many things, investing in the future, as opposed to the present, is key. Searching for future growth statistics and upcoming regeneration schemes will give you an idea of the tenant demand you can expect upon completion. 


So, whether you’re building your property portfolio or are looking to begin your investment journey, Off-Plan property provides a lot of food for thought. It’s uniquely positioned to offer benefits that a completed property can’t – such as the guarantee of a new build. 


And while there are inevitable risks, such as the completion period and future tenant demand, a lot of these risks can be minimised with thorough research. Choosing trusted developers and carrying out your due diligence will reduce the risk of your investment and even across your overall portfolio.


As always, you should speak to an expert – such as a financial advisor – before you make any investment and ensure that your chosen asset is designed to meet your goals.

the grand exchange

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