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Investing in a new-build apartment? Here's what to look out for

By Maurice Shasha  //  Wed 5th February 2020
But don’t be seduced by the surface gloss of a brand-new home - you need to approach your decision in a business-like way as any other UK property investment.
New build homes have plenty of appeal for the would-be buy to let landlord, from shiny new fixtures
New build homes have plenty of appeal for the would-be buy to let landlord, from shiny new fixtures and appliances to good eco-credentials and interesting locations in regeneration areas of city centres.

It's important not to judge a book by its cover and your decision should be based on a variety of factors which vary depending on if the property is being bought as an investment or for you to live in. Be guided by the same principles as if you were investing in a period home; rental yield potential, capital growth potential, your target tenants and a realistic analysis of current and future demand.

As with any property investment ask yourself

· Is the property in the best location?

· Will the potential monthly yields cover my running costs?

· If I'm taking out a mortgage, will the yield cover the repayments?

· Will a new-build house attract my preferred tenants?

· Is there potential for capital growth in the longer-term?

The pros of investing in a new build

· Get in early and you may be able to shape what your investment property will look like - at least by choosing the kitchen and bathroom.

· Discounts are often available for buying off-plan - before construction has finished, or even begun.

· New homes need to meet rigorous environmental standards, so it’s likely your property will be energy efficient with a good EPC rating and lower bills for tenants.

· Apart from the inevitable teething snags with new builds, the property should be in an immaculate condition and not require any major repairs. It will also come with a 10-year builder’s warranty.

· New builds in London are often part of wider regeneration projects, meaning your property may be set among attractive new facilities, making it more appealing to your potential tenant pool.

· Once complete, it is likely you'll be able to move tenants in immediately and start drawing a monthly rent.

· Buying off-plan can be a simpler process with no chain or other complications.

· A new property will always appeal to tenants who like everything clean and pristine, as well as those who want to be able to move straight in.

The cons of investing in new build

· New builds tend to lack the character of older homes and may not hold their value as well - the most appealing period properties will always attract high demand.

· If buying off-plan, you will have a wait of months or even years until the property is finished and you begin receiving your rental income.

· With off-plan developments, things can change during the construction period - the property spec could be altered, and timescales slip, plus house prices, rents and tenant demand could all rise or fall.

· New developments tend to be leasehold with ground rents and service charges to pay. While this also applies to the majority of London’s apartment blocks, new developments have come in for criticism for spiralling ground rents. Get your solicitor to check the conditions carefully.

· Such properties often come with teething problems, some of which won’t go away. It’s recommended that you have a professional snagging survey and get your builder to iron out any issues before you exchange contracts.

· Buying new may mean you are paying a premium - recently-built, established blocks may be better value.

· If you decide to sell an apartment in a larger development, you may be competing with many others. Investing in a flat in a smaller block can help you avoid this issue.

· New builds can be risky and have seen values drop in some areas. However, as a hotspot for development, London has tended to see prices hold.

· Check that your potential property is suited to your target market and has all the facilities they will need. Parking, for example, is often limited or non-existent in London blocks. Is there enough space, and soundproofing, if you’re targeting families?

If you are investing in buy to let in central London - whether new build or period home, we can help. Contact Plaza Estates estate agents to discuss the best investment for your needs and to find out about our selection of properties.

Offices at

Marble Arch
29 Edgware Road
W2 2JE
f: 020-7258-3090
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