new build houses - a good investment???

gingernutbizkit

my partner and i are planning on selling our house in the summer and spending around five years buying and selling property to get ourselves in a better position to buy our dream lifelong house.

In the area we are looking at there are a lot of new properties being built and we wondered if there was a way of making money by buying off plan and then selling on once completed.

Any thoughts?

Massive_2

This is commonly called flipping.

It was popular and profitable a few years ago in the consistently rising market of that time.

Unfortunately, the same marketing tools are still used by developers, but on the whole current market growth is much less able to overcome the cost.

Technically, it is possible to profit in this way, but only within very specialised niches, and it is not recommended for even an experienced investor to try in the current climate.

The off plan and new build market is specifically managed to take advantage of novice investors, and there are several potential layers of financial interest who are ahead of you in the queue for profit.

As such there are a whole host of very specific reasons you should be extremely wary of entering this arena. I consider myself a leading authority in this field, and I do not recommend it.

Regards

Generali

It's incredibly risky. Only do it if you can afford to buy the place if you are forced to and would like to live there.

In the US, purchasers that have tried to walk away leaving their 10% deposit behind are being persued by builders in the courts!

Richard_Webster

gingernutbizkit wrote: »

my partner and i are planning on selling our house in the summer and spending around five years buying and selling property to get ourselves in a better position to buy our dream lifelong house.

In the area we are looking at there are a lot of new properties being built and we wondered if there was a way of making money by buying off plan and then selling on once completed.

Any thoughts?

If the market is definitely rising you might get away with it - but how do you know?

New builds are generally more expensive than similar second hand houses so if you wanted to sell while the builder was still selling other houses on the estate then you would probably have to undercut his prices to sell. I note that there are "lots" of new houses in your area - sothere won't be any scarcity value.

If you keep the house for a time then people will start comparing the 1-2 year old house with other say 10 year old houses in the area and ask why they should pay premium prices just to get a house that is slightly newer!

amcluesent

The 'snagging' problems with new builds are notorious. But then, what do you expect then the 'tradesman' tool of choice is now the chainsaw? I would steer very well clear of new builds that are thrown together as cheaply as possible.

rizla01

As an investor I echo all of the adverse statements issued and my OH is a New Homes Property Negotiator.

It may be worth LOOKING but only invest if you find a property that is unusually better located than the rest or has a certain wow factor lacking in the others but multiple investors will probably get in first.

Go to any site and look at the ones that went first and try to recognise the reason why.

Also bear in mind that invariably it is the builder that puts the value on the properties and not the local EA, so many are overpriced.

Zammo

If you can find the right area then I'd say go for it. Make sure you pick an area that is being redeveloped or regenerated. I've seen prices rise 20k-30k in one area of my city because of this. Otherwise I would probably steer well clear.

mags24

I would echo the advice of others. I personally am very gloomly on the future direction of property prices, and if there is a crash, the ones that will suffer longest and hardest are 1-bed flats.

The market for 2-bed new builds has been sent sky-high by people buying them for BTL investment purposes. However, those that overstretched themselves to buy are often finding when it comes to sell that the builders are offering huge "unofficial" discounts to get shot of the last few in any development. This might take the form of offering to pay their stamp duty, throwing in soft furnishings and white goods - all this on top of "brand new". Trying to sell in a local market with that sort of competition will be very difficult.

You might do better with buying private probate sales which are "tired" in estate-agent-speak and refitting bathrooms & kitchens and slapping magnolia about. But there is a lot of competition for those sorts of properties. You would have a negotiate a good working relationship with local estate agents. What that might involve, I wouldn't like to say....;-)

garagemc

I would suggest another area of investing for now.

gingernutbizkit

thanks everyone for your thoughts..... maybe it's not the way to go afterall.

rizla01

NOOooo. dont give up your dream - just not newbuilds unless you are in an area of regeneration as already mentioned.

Auctions still occasionally offer a bargain but beware of severe problems.

Probates and repossesions are often a good bet.

If you can buy a bit of land and build new, you can make good money.

Just going round estate agents and putting forward 'Silly' offers can reap rewards if you have cash and can get someone out of a hole in a hurry.

Painful and stressful is buying a prop and living in it while you carry out improvements but it works in the end. (I'm doing that right now BTW).

Nothing wrong with buying a place and doing it up so that it would rent for more than you can mortgage it for and borrowing against it to make another purchase and that way build up a portfolio over time.

Property isn't on the way down yet, but rises will be slow but continual, I believe, for the next few years. Max 5-6% per annum depending on the area.

Just make sure that you do your homework first and DONT do the place up for YOU.

Unless you are really silly or very unlucky you cant lose with property, so DONT give up that easily.