Completed property is the bread-and-butter of the UK’s residential buy-to-let market. Off-plan property can, however, be an interesting alternative. Here is a quick overview of some key points of interest for landlords and how the two types of property stack up.
Finding the right property
When it comes to finding the right property, the first consideration is likely to be the location. Completed property and off-plan property are on an even footing here. The second consideration is likely to be whether or not the property is a good fit for the intended demographic. Again, both types of property are probably on an even footing here.
The third consideration, however, is the condition of the building. This is where there can be a significant difference between completed and off-plan property. Completed property may require at least some degree of upgrading in order to be legally-acceptable as a rental property. This is particularly likely with older buildings which tend to have poor energy performance.
Off-plan properties will be built to the highest modern standards (at least if you choose a reputable developer). This means that they are far more likely not just to be legal, but to be desirable to tenants.
Financing a purchase
Lenders tend to be far more willing to offer mortgages on completed properties than on off-plan properties. This is mainly because off-plan properties can be subject to lengthy delays. These may be totally outside the developer’s control (e.g. COVID19). In some cases, developments may even be abandoned, although this is very rare in the UK.
This means that anyone wanting a mortgage for an off-plan property is likely to find themselves with a very limited selection of providers from which to choose. This may push up financing costs. On the other hand, off-plan property is generally sold at a significant discount to its final expected value. This means that it can still be a very cost-effective option.
Finding and managing tenants
Unless you can find a completed property with special features (at the right price), off-plan property is likely to have the edge here. Tenants know that because the property is new it is likely to be in good condition. This is reassuring for them. It also reduces the likelihood that you will be called upon to deal with serious repairs and heavy-duty maintenance.
In the UK, there is always a demand for property. Of course, there may be different levels of demand for different types of property. There is generally a decent level of demand for completed property which is old enough to be considered “period”. Buyers are not, however, necessarily so keen on property which is relatively modern but not new.
In simple terms, this sort of property tends to be too new to have period charm and too old to have the benefit of up-to-date building standards. These properties can be appealing if thoroughly renovated, but this is, of course, an extra cost.
There is generally very high demand for new-build (or close to new-build) property. As previously mentioned, buyers know that such properties tend to be low-maintenance (i.e. low-hassle) places to live.