Off plan property investment is investing in a property at early stage of development. The model applies to new developments and timings to completion vary. Off plan investments are leveraged transactions therefore potential returns in a rising market could be substantial.
The London property market has consistently seen a high growth rate with some areas rising consistently by over 10% a year.
What we do
Through our RH Premier service, we assist our clients in purchasing off plan properties. Richmond Hughes has established relationships with reputable property developers in London, which enables us to negotiate favorable terms for our clients on bulk deals on both discounts on the asking price and terms of payments.
Investment model explained
Example: An investor purchases 4 apartment units worth £5m at £4.85m after receiving a discount of 3%. Initial cash outlay required would be 10% of the purchase price i.e £485K. Assuming the value of property increases by 7% over a 12 months period and is sold for £5.35m, the investor receives a pre-tax return of 72% on their original cash outlay of £485K.
RH aims to source off plan properties, which are 24 months or more to completion, giving the investors a chance to take advantage of rising prices.
Example of buying process and fees
Identify the properties and negotiate discounts/terms
Reservation fees £10-20k (Refundable less expenses)
10% payment to exchange contracts
10% payment 6-12 months after exchange
10% payments 12-24 months after exchange
Balance on completion
Our investors are always made aware of the risks involved in off plan investments. Just like any other leveraged transaction, the potential for both upside and downside is high. Investors are made aware that in case properties remain unsold and next tranche of payment/completion becomes due, the investors need to be in a position to meet the obligations through personal funds or financing.
