Both off-plan and off-market properties can both offer exciting opportunities for investors. Here is a quick guide to both types of sales to help you decide which option is right for you.
What Is Off-Plan Property?
Off-plan property is a property that is still in the process of being built. Sometimes, it may be nothing more than a plan (and planning permission). In others, it may be partially constructed but still some way off completion.
Off-plan property is generally sold at a discount to completed property. As a rule of thumb, the earlier a buyer purchases, the more discount they are given.
What Is Off-Market Property?
Off-market property is completed property available to purchase but has yet to be marketed actively. There are two common reasons why this might be the case. The first is that the seller is under no pressure to sell. This means they can wait for the right buyer to make the right offer rather than actively market the property.
The second is that the property is tenanted, and the landlord does not wish the tenants to know of the sale. The most obvious reason is that they want to avoid the tenants leaving early and creating a void (and potential security issues).
First, off-market property may be less affordable than regular on-market property. On the one hand, there will probably be less competition for it. On the other hand, sellers may be able to wait as long as it takes to get the offer. In the second case, however, sellers may be happy to accept a low price for a quick and easy sale.
How Does Buying Off-Plan Property Compare To Buying Off-Market Property?
Here is a quick guide to the main differences between buying off-plan and off-market property and what they mean in practice.
Finding A Property
Off-plan property is relatively easy to find. Often, you can look at property developers’ websites and see a public list of the off-plan properties they have for sale. With that said, it’s vital that you do robust due diligence on the developer.
Ideally, you only want to work with property developers with a solid track record of delivering property developments on time and as specified. It is reasonable to give developers a bit of leeway with timeframes (due to COVID-19 and Brexit). Even so, this leeway should still be within reasonable limits.
If you are going to work with a new developer, you need to be confident in its management team. They should have a compelling track record of success elsewhere, preferably in the property sector.
The main ways to find off-market property are to develop relationships with estate agents and work with firms specialising in off-market property. The latter may charge buyers fees to access their services. This may be an inconvenience, but it’s also a straightforward way for these businesses to determine whether or not buyers are serious.
What Can You Expect From A Property?
The fact that off-plan property is in the process of being built means that it’s built to the most modern standards. In particular, it’s built to the highest standards of energy efficiency.
This is relevant to landlords who must meet minimum energy efficiency standards (MEES). It is, however, also useful for people who want to flip properties. Buyers were becoming more concerned about energy efficiency before the cost-of-living crisis hit. The cost-of-living crisis has, however, done a lot to focus people’s attention on the importance of energy efficiency.
Another bonus of off-plan properties is that you can often customise them. For example, you can choose floor coverings, paint colours and work surfaces.
Off-market property is regular, completed property. It can therefore be any age, any style, and any condition. Buyers, therefore, must ensure they are clear on what they are (and aren’t) buying. In particular, investment buyers need to factor in the cost of any upgrades required to meet the MEES.
Assessing The Property
It cannot be easy to assess the likely performance of off-plan property because it will be in a new development. This means that there will be no direct comparable.
Reputable property developers choose their sites carefully. They want and need them to appeal to both residential and investment buyers (and hence also to tenants). Their newness also tends to be a central sales point. Furthermore, the fact that off-plan property is sold at a discount can make it much easier to achieve a good return.
Off-market residential property tends to be easier to assess (although exceptions exist). Off-market investment property can almost evaluate itself. You can ask for details of the income it is generating and factor that into your offer.
Paying For The Property
Off-plan property is generally paid for in instalments. Off-market property is usually secured with a deposit and paid for upon completion.
Off-plan property is often harder to mortgage than off-market property. With that said, developers can assist with security mortgages.
The Transaction Process
The off-plan property has yet to exist and can’t be surveyed or valued. The conveyancing process is, generally, very straightforward. Buyers should, however, still beware.
Administrative mistakes do occasionally happen. When they do, it’s best to get them put right before you sign a contract rather than afterwards.
With off-market property, the ease of the actual transaction process depends very much on the seller. If a seller is not under any pressure to sell, they may not be under any pressure to do the necessary work. This can be very frustrating. On the plus side, the off-market property is unlikely to be in a chain.
If, on the other hand, you are dealing with an investment seller, then the transaction process is likely to be as smooth as it can be. All the people involved with it (in any capacity) will be motivated professionals.