In the UK where there is a distinct shortage of homes for the population Government schemes have encouraged some much needed activity in the new-build sector in recent years. While for some a newly built home is exactly what they want, investors might not be 100% certain that it’s the best option for them.
To help you navigate the choice between investing in an existing, older home and a newly built property we’ve listed some pros and cons of buying a newly built home as a buy-to-let investment.
To start, let’s take a look at the pros of buying a newly built property.
- You can negotiate an all-in price which includes furniture and a nicely manicured and fenced garden. This is more typical if you buy off-plan and while the price is often fairly set you can do your best to have as many new fixtures, fittings and appliances included in that set price, as possible.
- Newly built homes adhere to a number of energy efficiency rules so it’s a good selling point for potential renters as their utility bills should be lower due to the energy efficiency details built into the home.
- You should be able to secure a new-build property with a relatively small initial deposit. This can give you the time to raise the remainder of the deposit required for any mortgage or allows you to keep on looking elsewhere at additional investment properties if you’re increasing you’re buy-to-let portfolio.
- If the infrastructure isn’t perfect when you’re pay your initial deposit, there should be progress on that as the development grows and nears completion. New roads, new shops, new leisure facilities and new schools if it’s a particularly large site.
- You will get a 10 year NHBC guarantee which provides a good basic cover so any insurance you do need for contents, fire damage or burst pipes will be kept to a minimum during that period.
Sound good? Well, before you jump in with both feet here are the potential cons.
- You can’t always negotiate for all that furniture, appliances and fixtures and may end up paying a higher than expected price for those necessities.
- New-build homes are often smaller than older properties. That could make it harder to rent them out or you may have to charge a slightly lower monthly rental rate due to the difference in size.
- If the property isn’t renting as well as you’d hoped or a better option comes up, you might struggle to sell the property. This can be a particular issue if the development you’ve opted for is a large one and new properties are still being built. If you must sell at this stage, be prepared to make a loss.
- The builder’s completion dates can often be way out and any prospective tenants you’ve secured may not be happy to wait the time it takes for it to be live-in ready.
- While there is an NHBC guarantee and most builders will fix any maintenance issues in the first 12 months, you will have to wait for the builders to undertake those works. This can be particularly frustrating if you have an existing, reliable team of builders at your disposal.
There are many reasons for and against purchasing a newly built property for investment purposes, and each investor has different requirements. Hopefully you’ve found our list helpful in making this decision!