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Are New Build Homes Better For Buy-to-Let?

Are new build homes better for buy-to-let?


As a buy to let landlord, you'll always be on the lookout for new investment. Apartments, terraced or semi-detached you'll consider every type of property. Of course, there are things you'll take into account; cost, location, condition etc. But there's also another choice to make. Do you opt for a new build or an established property? Landlords tend to look at older properties but there does seem to be a bit of boom in new housing developments. So, should you consider a new build when you expand your property portfolio?

 

Benefits of new builds for buy to let landlords

 

There are plenty of reasons why buy to let landlords should consider new builds. They have many advantages over older housing including:

 

·         No need to decorate. You’ll appreciate the neutral tones of a new build. In many new builds’ fittings including carpets, curtains and other furnishings are included.

·         No repairs. When buying a property, a landlord will usually have to do some repairs. This adds to the costs and delays a tenant moving in. Apart from snagging a new build won't need any work.

·         More energy efficient. New builds will be fully insulated and have a high EPC rating. You certainly won't have to worry about your Energy Performance Certificate.

·         New builds are...new. The boiler will be new. As will be the plumbing and electrics. No more nightmares wondering if the boiler will blow up. You don't have to worry.

·         Cheaper to maintain. New property = no or very low maintenance costs. And expensive repairs shouldn’t be an issue either. At least not for many years. Most new builds have a 5- or 10-year warranty against major repairs.

·         Local amenities. Developers usually site their new estates or complexes near to local amenities. Some developments will have their own facilities including shops, cafes and a gym. Needless to say, this will be a big plus point for tenants.

·         Transport links. Developers will usually ensure their new builds have excellent transport links.

·         You can buy off-plan. As we'll discuss later this could also be a negative. But buying off-plan can get you a discount on the price of the property increasing your potential yield immediately. However, buying off-plan does present some obvious risks.

 

So, you'll see plenty of potential benefits with new builds as a buy to let project. But, as with anything, there can be downsides.

 

Things to think about

 

Although buying off-plan can net you a discount on the price of the property, there are a couple of issues to take into account.

 

Firstly, buying off-plan does present a bit of a risk. Plans may change. Delays are often inevitable. The developer could have financial problems. Because of the risk of buying off-plan, a buy-to-let mortgage may be more difficult to arrange. You may have to find a specialist lender and the deposit can often be larger than normal too.

 

Something else to bear in mind with buying a new build off-plan is the time it will take to install a rent-paying tenant. With the deposit and mortgage payments, you'll have made a significant cash investment before generating any rental income.

 

Although we mentioned earlier that a new build is ready to rent out as soon as you take possession that isn't always the case.

 

Most, if not all new builds, will inevitably have some issues. Do a comprehensive survey immediately you get the keys.  Make sure the developer actions your snagging list quickly. Then you can start looking for a tenant.

 

New build or not? The final questions

 

When you're considering whether to invest in a new build you need to look at the same things you would with any other property.

 

It's still all about location. We've mentioned most new builds are ideally located. But not all. You still need to do your due diligence. Especially if you're not familiar with the area. Are there good transport links? Is there adequate parking? What about local schools, shops and recreation? A new build has to tick all the boxes location wise. One of the most important questions to ask yourself; is the property appropriate for the type of tenant you want to attract?

 

Finally, you need to crunch the numbers. No surprises there. But take into account the purchase price, off-plan discount, time to let the property and any other expenses. Are you able to ask and get the rent you need to cover your costs? How long will it take for the rent payments to start coming in?

 

In the final analysis, whether new builds are better for buy to let landlords comes down to the usual question; is the potential yield high enough to warrant your investment?

 

DIY landlords, you can find tenants fast by listing your property with MakeUrMove, the online letting platform bringing landlords and tenants together.


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