Buying off Plan in England and Wales

Home UK   Buying off Plan in England and Wales

Buying off Plan Property in the UK - Buyers' Guide

Buying Off Plan Property in England and Wales

Buying off plan property in England and Wales is the goal of many investors and second home buyers around the world. The buying process is essentially straightforward with the same procedures in place for both national buyers and foreign investors.

All British estate agents are licensed and have taken legitimate exams in order to become professionals in the real estate market place. It is essential to work with an experienced estate agent in England and Wales as it is anywhere in the world. The estate agent acts not only on your behalf, but on behalf of the developer and in some cases for both parties. Estate agents will charge their commissions to the developer, so the price that is advertised is the price you pay.

Most estate agents in England and Wales work within a relatively small area in relation to their office and you may find that it is necessary to speak to several different offices in order to find a property that meets your requirements.

Buy to Let Properties

Buy to Let properties have been an extremely lucrative way of investing in property for many years now. But buyer beware, there have been many investors who have failed to profit from rental properties. Successful investors tend to invest in an area that they know; they have ways and means of doing their own due diligence and often have a network of contacts that will give truthful answers to important questions as against the answers that they may wish to hear.

Successful Buy to Let investors utilise local knowledge to their advantage when it comes to acquiring a property at the right price and pricing it correctly on the local rental market. They will target a specific corner of the market and cater directly to them so that they can achieve the highest possible occupancy year on year.

There are a number of 'specialist' companies that market off plan properties with guaranteed rental plans which could/ will cover your monthly outgoings for the first two years. This is great in a rising market but what happens when the rental guarantee expires and the property market has gone soft?

You should always try and research the long term prospects of each and every Buy to Let property so that you have an exit strategy in place should things go wrong - inevitably they will at some point in an investors career. One of the main problems with Buy to Let properties is that they are reliant on the monthly rental to cover the costs. When investors take out 100% mortgages, this can happen with just a couple of interest rate rises. It is far wiser to pay 20% down with cash funds where possible because it will give you a huge advantage in the future should the rental market begin to slide as you will have the ability to drop you rental price if necessary and undercut investors who have higher monthly outgoings.

Currently with first time buyers struggling to get onto the property ladder, strategically placed Buy to Let properties are seeing a surge in business.

Commonhold, Freehold or Leasehold property in England and Wales

There are essentially three types of property in England and Wales and it is crucial that buyers are aware of the differences

Commonhold Property

The term Commonhold means that for example a flat with a freehold title will also have common areas of the building, the land or both which you will share with other owners - this is often referred to as a Commonhold association. There are no service charges or ground rents as the areas are wholly owned by the 'Common Group' of owners. You will have to pay for any expenditure incurred such as maintenance costs, insurance, administration and the Commonhold Association's expenditure. These costs are split between the owners of the property

Freehold Property

Freehold properties are the most sought after as the land on which the property is constructed is part and parcel of the whole property and there will be NO service charges or ground rents to pay. Outside of major cities, freehold titles are the most prevalent form of property.

Leasehold Property

A leasehold property is a 'building' that is wholly owned by the home owner but it does NOT include the land on which the property stands. The land will be owned by the freeholder, to whom you will have to pay ground rent and sometimes service charges to on an annual basis.

The length of the lease reduces as years go by and you will need to ensure that your lending bank will accept the lease based on the amount of years left to run. Leases can vary a great deal depending on the type of property and its location. Some leases are renewable and some are not so we recommend that you seek legal advice prior to entering into any negotiations regarding leasehold purchases.

A monthly or annual service charge is typically charged to leasehold home owners by the freeholder. This service charge will cover, general cleaning, gardening, maintenance and repairs of the building and its land.

A group of leaseholders who live in the same building can make a mutual agreement and se their right to jointly purchase the building and or take over the management.

You can get further information and advice about leaseholds in England and Wales from:-

The Leasehold Advisory Service
31 Worship Street
London
EC2A 2DX
Tel: 020 7374 5380 Or 0845 345 1993 (9.30am to 3.30pm Monday to Friday)
E-mail: info@lease-advice.org.uk
Website: http://www.lease-advice.org.uk/

Prior to entering the property market arena it is often wise to speak to your bank and establish how much you can actually afford. This will channel your focus as to what you van buy, where you can afford and also take into consideration the buying costs, and subsidiary expenses of not only making the purchase but also the costs of maintaining it after you move in. Some building societies can provide you with a 'pre-qualification certificate' that states the amount that they are willing to lend you subject to the property being approved by them.

Off Plan Developments

Off plan developments are obviously free of chains from the vendors' side and this unfortunately can remove the option to make offers unless you are buying several units. However when buying a new property the prices are often reduced especially if you are buying a property that is just starting the construction process - i.e. buying off plan.

When buying an off plan property, you will normally be obliged to pay a reservation deposit of £1,000 and 3%-3.5% a month later for the deposit, minus the initial reservation fee. A further one or two stage payments of similar amounts - 3-3.5% - will frequently be required as construction proceeds, with the final payment paid upon completion.