New Build or Resale? | Things to consider when buying a new build buy-to-let investment property
With many types of properties on the market all appearing to offer good returns on investment, it is important to keep a clear head and focus on what you believe will offer a good return. Some choose to go for a new build property and buy off-plan, whilst others will spot a resale opportunity in a good area as their next asset.
Why buy new build?
One of the advantages of buying a new build is it should come with a ten-year guarantee from the NHBC (National House Building Council). This will be very useful if any of the ‘snagging’ issues arise once the building has been completed. Take care to ensure a smooth and efficient handover and snagging inspection once the property is completed to ensure the property is in perfect condition before renting out the unit.
Another advantage is that some new builds come with energy saving insulation and devices which keep energy bills low. This is naturally a good selling point when it comes to letting the property. However, there are a few things you should look out for before committing to buying a new build.
Research the developer
You must do as much research as you can on the developer building your property. If possible, check any of their previous developments to see if the homes meet your expectations. If the developer is online and has a community forum, see if it is possible to contact some of their past customers and get some feedback. Find out how quickly they dealt with issues like snagging inside the property, and what the standard of aftercare was like.
Make sure you are protected
You must also check if you are protected. Your solicitor will be able to check if the developer has the right insurance to safeguard you if they fail to complete or go bust after you have put a deposit down.
Another potential snag in buying off-plan is the deadlines. The majority of mortgage agreements are only valid for six months. If the developer’s completion date exceeds six months, you may have to reapply.
Snagging and Handover
Ideally, a snagging survey should be done after the building has been finished and before the legal completion date. This will allow the developer time to put things right before your tenant moves in. Some developers refuse to allow a snagging survey before completion. If this happens you should arrange a survey as soon as you take possession of your property. However, you can have a snagging survey carried out during the first two years of owning the property, and the developer is obliged to correct any defects found during this time.
At the point of handover, you should ensure that you have the correct meter readings and copies of gas safety certificates and any other guarantees and warranties.
Although you have bought in a new build development, do not think it will never require any maintenance. As a landlord, you will be responsible for keeping your property safe and secure for your tenants.
Do your sums and ensure there is an adequate money set aside for maintenance, and in the case of older properties, refurbishment if and when this becomes necessary.
When you do your sums on how much you will need to cover the mortgage and make a profit, make sure you make an allowance for some cash to be put aside to pay for maintaining your property.