5 Common Off-Plan Investment Mistakes
There’s a huge amount of advice out there on how you should invest, whether you’re taking your first steps into property investment or you’ve been around the block a few times.
While the advice on how to invest is one part of the puzzle, we’re also interested in the property investment mistakes investors make along the way and more importantly, how these can be avoided.
In this article we explore the most common mistakes that we see or hear about. Investors of all levels can make mistakes, so we’ve taken this opportunity to discuss some of the common pitfalls and how you can avoid them.
Not Having a Clear Plan
When it comes to investing, having a clear financial plan is crucial, not only does this allow you to identify your goals but it often makes reaching these that little bit easier. Successful property investors know why they’re investing and how different properties can help them achieve financial freedom, especially when it comes to off-plan property.
Before you jump into the property market, you’ll need to ask yourself, are you looking for competitive rental yields or capital growth? Do you know where you want to invest? Do you have a short- or long-term investment strategy? Knowing the answers to these questions will help you further down the line, so it’s crucial to bear these in mind at the beginning of your investment journey.
At this point, it’s also helpful to know exactly what your budget is, this way you’ll be able to avoid overspending and you’ll be able to get the most value for your money. To get an idea of what to expect, property market forecasts and rental yield predictions are crucial.
Missing Out Vital Research
One of the most important parts of the planning stage is research, which will not only highlight suitable property types, it will also help you to choose the right location for your off-plan property investment. However, when considering property types, locations and everything in between, it’s important to remember to keep an objective view.
For example, if Birmingham is a top contender for your off-plan property investment, you’ll need to research the entire area. It’s not uncommon for people to invest in areas they’re unfamiliar with, so try and learn as much about the area as possible.
You’ll usually be able to find information on the local area and any upcoming developments in guides, blogs and across local websites. Remember that trusted partners are your friend – if you can get in touch with letting agents or property professionals in the area, they’ll be able to help.
But what exactly should you be looking for? When buying off-plan in the UK, identify areas seeing regeneration, fast rising population forecasts and predicted growth. Here, you’ll be able to get a better idea of the current and future tenant demand.
Last but by no means least, research the developer. If you’re investing in off-plan property, you’ll have your money tied up in the build for around two to three years, so buying with a reputable developer is key. Look for developers with a consistent track record of delivering high quality builds, and whether or not these were completed on time. And if you can find them, testimonials are even better – how did other investors get on with the developer?
Similar to the location of your investment, there’s no such thing as knowing too much about the developer, especially when this could lead to delayed builds and subsequently, a delayed income.
Becoming Emotionally Invested
Investing in the property market is exciting, so it’s not uncommon for investors to get emotionally involved in their investment. After all, we’re always told ‘heart over head’, but more often than not, it’s better to keep your emotions separate from your investment.
Throughout the entire process, it’s important to stay analytical and base your decisions on your research. If you invest according to market data, price predictions and local forecasts, the chances are you won’t go far wrong. As long as you consider the location, local tenant demand and your objectives, it’s likely that your off-plan property will help you to reach your financial goals.
Investing in UK property comes with many moving parts, but as with any investment, it’s about making informed decisions. So, if you just remember to avoid overspending, choose popular locations and keep your objectives in mind, you’re going the right way about buying off-plan in the UK.
Not Having Confidence in Your Investment(s)
Chances are, by the time you come to reserving your off-plan property, you will have been researching and planning for quite some time. While this makes the reservation process exciting, it can also be a nerve-wracking time. This often leads to many investors backing out and missing out on what could have been a lucrative investment opportunity, so confidence is key.
By this point, you will have carried out thorough research on locations, property types and developers with a clear financial plan in place, meaning you should feel confident enough in your abilities to invest without letting your emotions get in the way.
It’s no secret that a lot of investors back out at the point of reservation if they don’t feel fully confident in their investment, but if you do have the confidence to make the reservation, you’re much less likely to miss out on something you could come to regret.
Skipping Due Diligence
Regardless of the asset, due diligence will be a major part of the investment process, so this is more a general rule of thumb. Ranging from making sure you have a good cash-flow to equipping your legal aid with critical information to perform their own due diligence, this consideration is essential at every stage of your investment.
Most of the mistakes we have mentioned here can usually be avoided with good due diligence. You’ll need to know some key investment information, including where you’re going to invest and what your cash-flow will be, both of which will give you more confidence with your off-plan property investment.
However, it’s also important to remember to seek advice from a professional, whether that be from a tax specialist or a mortgage advisor about your investment. Buying off-plan in the UK can be time-consuming and a complicated process, so having this support can often reduce the pressure of the investment and build your confidence.
Investing in property comes with a wealth of considerations, and while you can educate yourself on what to do throughout the process, it’s important to consider the common pitfalls of this process. From having a clear plan to carrying out your due diligence and conducting thorough research, these steps are crucial in the investment process and can make a big impact on the overall performance of your portfolio.