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Last edited 08 Aug 2018
Reducing the risks of investing in off-plan property
The property market has become a very competitive place recently, with more and more investors trying their hand at a variety of different property types, as they look to develop their portfolio as best they can. With investors pushing the demand for property and with the United Kingdom currently experiencing an under-supply in the property market, investors have been looking towards the prospect of buying off-plan.
Buying off-plan property involves purchasing a property that has not yet been built, typically a year before the completion date. Not only do developers reduce their own risk by agreeing to sell the property early on in the process, but investors can often get the property at a lower price than may be anticipated – creating a deal that suits both parties. The investor will pay a deposit for the property to secure their purchase, usually set at 10%, and then there will typically be instalments for the remaining balance.
Almost certainly the biggest risk associated with off-plan property purchasing, is the potential for the developer to go bankrupt before the completion. The investor then loses any money paid up to that point, unless there was insurance in place.
An investor can receive a mortgage in principle for their property, with the information passed from the investor to the mortgage broker to receive their mortgage upon the completion date of the property. Such mortgages in principle are typically not withdrawn, and there should be very minimal risk.
Property prices always fluctuate, that is something that is accepted within the property market, but if it becomes a more long term issue then it may be a result of poor research on the investor’s side.
 Selling property before the completion date
This process is known as 'flipping' a property for a short term, quick profit. However, purchasers may benefit much more from the rental income of the property, as well as any capital gains when the property is sold in a number of years time.
--HopwoodHouse 15:54, 27 Mar 2018 (BST)
 Find out more
 Related articles on Designing Buildings Wiki
- A guide to investing in off-plan property in the UK.
- Buyer-funded development.
- Hope value.
- Investment property.
- Off-plan property.
- Project-based funding.
- Property development finance.
- Real estate investment trust.
- Residual valuation of land.
- Shared ownership.
- Speculative construction.
- What is a mortgage?
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