  
Off Plan: Popular Method of Buying Property
Off plan investing allows you to buy property from developers before the building has been completed. This has been very popular across Europe and North America. This method of buying has been utilised by a large percentage of property investors over recent years to seriously increase their net worth through property investment. This allows you to benefit from discounts offered and take advantage of the capital growth during the build time.
Why Off Plan Property Investment
Just a few of the reasons to consider off plan as an investment
• You always buy under market value regardless of the market
• All your research is carried out for you
• It takes little time and effort on your part
• Invest in regional hotspots without leaving your home
• Ability to diversify your portfolio
• The demand for property outweighs supply
• Low maintenance costs with a 10 year NHBC guarantee
• Greater flexibility in financing for a new build property
Off-Plan Explained
The financial benefit of an off plan property purchase is that it allows you to invest a small percentage up front with the balance being funded via a buy to let mortgage. Let’s take an example.
With an off-plan property purchase of a £120,000, the investor would typically put down 5% of the purchase price. This equates to £6000. If the build time to completion is 12 months and property is rising at 5% pa, the property will be worth £126,000 upon completion.
The investor has taken advantage of capital appreciation during the build time. The investor has actually only paid £102,000. This equates to the £120,000 minus the 15% discount that Asset360 have negotiated for their client. The gross profit upon completion is £18,000. Once your initial investment is paid of off, your net profit stands at £13,200. Using this method again, you have the potential to do this many times.
This investment deal represents a 275% return. Compare that to a high interest bank account.
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Off Plan Investment Explained |
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Example
Assuming a property value of £120,000 and that Asset360 negotiated a discount of 15% |
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INSTANT EQUITY of £18,000.00 |
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Market Value |
£120,000.00 |
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Asset360 Discount or Gross Profit |
£18,000.00 |
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Net Price |
£102,000.00 |
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Asset360 fee @ 2% of market list price |
£2,400.00 |
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5% Deposit |
£6,000.00 |
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Legal Fees |
£1,200.00 |
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Mortgage Broker fee 1% |
£1,200.00 |
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Total Costs (Asset360, Legal & Mortgage broker fees) |
£4,800.00 |
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Asset360 Discount |
£18,000.00 |
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Profit Less Your costs |
£13,200.00 |
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Percentage Return on Investment |
275% |
The above worked example does not take into account any Capital Growth. Assuming a modest Capital Growth figure of 5% over the next 2 years, you would be able to attain a net profit of almost £25,200.00. The deposit has not been taken into account, as this becomes your equity.
Now depending on your goals, you can keep your property and let it out to build your portfolio. Or you can sell it on to realise a huge profit on your initial investment. Whatever your strategy we will be happy to assist you. Remember there is capital gains tax to pay when you sell an investment property.
Future Capital Growth Projections over 5 years
% Growth
Years 0% 5% 10% 15% 20%
1 £120,000 £126,000 £132,000 £138,000 £144,000
2 £120,000 £132,300 £145,200 £158,700 £172,800
3 £120,000 £138,915 £159,720 £182,505 £207,360
4 £120,000 £145,860 £176,692 £209,880 £248,832
5 £120,000 £153,153 £193,261 £241362 £298,598
Equity Growth Projections Over 5 Years
% Growth
Years 0% 5% 10% 15% 20%
1 £13,200 £19,200 £25,200 £31,200 £37,200
2 £13,200 £25,500 £38,400 £51,900 £66,000
3 £13,200 £32,115 £52,920 £75,705 &
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