If you want to invest in property then you might want to consider investing in a new build property. As more new developments are coming online post-recession more new build properties are being built all over the country, making them an increasingly interesting option for the property investor. In this article I will look at the ins and outs of investing in a new build property.
First let’s look at the advantages of investing in new build property:
* The existence of a new build property tends to suggest that strong demand exists for property there – otherwise the developers wouldn’t have built it. Chances are, therefore, there’ll be good demand from potential tenants.
* Brand new, new build property is very popular with tenants and so tends to let more easily than ‘old’ property.
* You may be able to charge a premium in rent for a new build property simply because it is new.
* New build property may be available at a very competitive price – especially if you buy off plan, before the property has been built.
* Maintenance time and expense ought to be reduced since everything is new. Some fixtures and fittings, alongside the property itself, will be covered by a warranty – often a ten year NHBC Buildmark warranty in case of the property itself.
* There’s no chain while you wait for your purchase to complete. The property is ready to rent as soon as it is completed.
There are, however, a few drawbacks with investing in new build property:
* Not all new build locations are that desirable to tenants – particularly brown field locations where infrastructure, shops, services and amenities may not be to hand.
* New build property sometimes attracts a price premium.
* Once the newness wears off your property won’t have any more appeal/added rental value than ‘old’ property. In fact, if it’s not in an established location it could even be less popular.
Here are some points to consider when investing in new build property:
* What is the demand like for rental property in the area? What are the rental levels like in the area?
Seek advice from agents. Bear in mind any information they can offer may be a ‘guesstimate’ since new build property not have a track record of lettability. Also bear in mind that guaranteed rental incomes offered by developers may not be the same as the actual rent achievable.
* Do a comparison. Work out if there is any difference in yields between investing in a new build property and in an older property in the same area.
* What type of a development are you buying into? Are you buying into a development which is being sold primarily to investors/landlords (perhaps overseas investors) – or one which is being sold primarily to owner occupiers? Each kind of development is a very different ownership proposition from the other – consider the pros and cons.
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