Welcome!

Blog Feed Post

Buying a new rental property

Buying a new build to let out?

Despite bad economic conditions, the UK's private rental sector is outperforming many other investments. On the whole, the government is pleased with it, and wants to see more growth.

‘Build to let’ is a term which refers to the building of new developments specifically for buy to let investment rather than owner-occupation. The announcement last year of a £200 million build-to-let fund means that many such developments might be finding their way into the market in the next couple of years.

Many of us will be thinking, then, about buying new build rental properties. But what are the positives and negatives, and how should we go about it?

The pros of buying new build

The pros of buying new build seem clear:

  • The house is… well, new, and so it shouldn’t require any major repairs for at least a couple of years.
  • The property is likely to be a good energy performer, with decent insulation, double glazing and energy efficient systems.
  • The transaction is ‘chain-free’. The seller is a developer who doesn’t need to buy another property themselves, so they’re not going to pull out because their own purchase falls through.
  • The home is a blank canvas. Depending on how early you exchange contracts, you can dictate pretty much anything – bathroom tiles, cupboard doors, doorbell jingle – making it easy to tailor the home to your perfect tenant.

The cons of buying new build

The cons, as you might expect, are less obvious.

  • Lenders’ requirements for new build funding are generally stricter. You might be limited to a particular postcode or development, you might be required to give information on the type of building and construction, and you’ll almost certainly need a larger deposit.
  • The property is ‘on notice’. The developer can’t guarantee when it will be finished, and you’re at the mercy of the building schedule. Completion might not happen until a long while after contracts are exchanged.

New build has two other pretty big problems associated with it:

…it tends to be small

In September 2011, RIBA (the Royal Institution of British Architects) released a report called the Case for Space: the size of England’s new homes. In it, they claimed that the average new property was 8% short of the recommended minimum size.

To clarify, the recommended minimum size is according to the London Housing Design guide. The guide is the only one of its kind in the country, and its recommendations still fall quite short of others in Europe – 50 square metres for a two-person, one bedroom flat, for instance. That will leave your tenants sorely lacking elbow room.

…it tends to be expensive

Remember the kid in school who never opened their new action figures because they’d instantly lose their value? Well, homes (sort of) work the same way.

Simply by virtue of having been lived in, a property loses value. Something called a ‘new build premium’ is added to a new build property in anticipation of that lost value, and it can be hefty. The worst thing about a new build premium is that there is no definite percentage, as there’s no way of saying how much value a home will lose.

Tips for buying new build

I’m not going to sugar-coat it – new build probably isn’t for inexperienced investors, and it definitely isn’t for those without a good amount of capital to invest from the outset.

If you want to invest in a new build property, remember the following:

  • Make sure the property is big enough for your tenants. Ask for measurements and floor plans, and don’t be fooled by the use of undersized furniture in the show-home (yes, this is a common trick!).
  • Be wary that a lot of features you’d expect a property to have are actually optional extras for a new build. This might include bathroom fixtures (toilet paper holders and towel rails), telephone connections, light fittings and even flooring. Find out which essentials will cost you extra.
  • A lot of mortgage offers have an expiry date, often six months after the offer is made. Ask for a ‘longstop date’ before this expiry date – if the mortgage still hasn’t completed before this date, you can withdraw without penalty.
  • ‘Snag’. This means scour the completed house for any small faults, much as you might with an inventory – this could be cracks in the plaster, doors that don’t shut properly, loose fittings, etc. If you aren’t very thorough or observant, take a friend or hire a snagging company (or better yet, ask if the developer does it themselves). Make sure any issues are sorted before completion so you can rent the property out as soon as possible.
  • Make sure that the developer is part of the NHBC (National House-Building Council).

Once you've chosen your new build buy to let property, you'll need a buy to let mortgage! Get a free quote from TurnKey Landlords

More Stories By TurnKey Landlords

Amelia Vargo is an online marketing executive for CT Capital. Amelia writes for Turnkey Mortgages, Turnkey Landlords, TurnKey Bridging, TurnKey Life and Commercial Trust.

Latest Stories
SYS-CON Events announced today that Calligo has been named “Bronze Sponsor” of SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Calligo is an innovative cloud service provider offering mid-sized companies the highest levels of data privacy. Calligo offers unparalleled application performance guarantees, commercial flexibility and a personalized support service from its globally located cloud platfor...
"We want to show that our solution is far less expensive with a much better total cost of ownership so we announced several key features. One is called geo-distributed erasure coding, another is support for KVM and we introduced a new capability called Multi-Part," explained Tim Desai, Senior Product Marketing Manager at Hitachi Data Systems, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
DevOps at Cloud Expo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 21st Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to w...
SYS-CON Events announced today that SkyScale will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. SkyScale is a world-class provider of cloud-based, ultra-fast multi-GPU hardware platforms for lease to customers desiring the fastest performance available as a service anywhere in the world. SkyScale builds, configures, and manages dedicated systems strategically located in maximum-securit...
There is a huge demand for responsive, real-time mobile and web experiences, but current architectural patterns do not easily accommodate applications that respond to events in real time. Common solutions using message queues or HTTP long-polling quickly lead to resiliency, scalability and development velocity challenges. In his session at 21st Cloud Expo, Ryland Degnan, a Senior Software Engineer on the Netflix Edge Platform team, will discuss how by leveraging a reactive stream-based protocol,...
With tough new regulations coming to Europe on data privacy in May 2018, Calligo will explain why in reality the effect is global and transforms how you consider critical data. EU GDPR fundamentally rewrites the rules for cloud, Big Data and IoT. In his session at 21st Cloud Expo, Adam Ryan, Vice President and General Manager EMEA at Calligo, will examine the regulations and provide insight on how it affects technology, challenges the established rules and will usher in new levels of diligence...
"DX encompasses the continuing technology revolution, and is addressing society's most important issues throughout the entire $78 trillion 21st-century global economy," said Roger Strukhoff, Conference Chair. "DX World Expo has organized these issues along 10 tracks with more than 150 of the world's top speakers coming to Istanbul to help change the world."
"At the keynote this morning we spoke about the value proposition of Nutanix, of having a DevOps culture and a mindset, and the business outcomes of achieving agility and scale, which everybody here is trying to accomplish," noted Mark Lavi, DevOps Solution Architect at Nutanix, in this SYS-CON.tv interview at @DevOpsSummit at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
DX World EXPO, LLC., a Lighthouse Point, Florida-based startup trade show producer and the creator of "DXWorldEXPO® - Digital Transformation Conference & Expo" has announced its executive management team. The team is headed by Levent Selamoglu, who has been named CEO. "Now is the time for a truly global DX event, to bring together the leading minds from the technology world in a conversation about Digital Transformation," he said in making the announcement.
SYS-CON Events announced today that Massive Networks will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Massive Networks mission is simple. To help your business operate seamlessly with fast, reliable, and secure internet and network solutions. Improve your customer's experience with outstanding connections to your cloud.
Internet of @ThingsExpo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 21st Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devic...
"The Striim platform is a full end-to-end streaming integration and analytics platform that is middleware that covers a lot of different use cases," explained Steve Wilkes, Founder and CTO at Striim, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
SYS-CON Events announced today that Calligo, an innovative cloud service provider offering mid-sized companies the highest levels of data privacy and security, has been named "Bronze Sponsor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Calligo offers unparalleled application performance guarantees, commercial flexibility and a personalised support service from its globally located cloud plat...
Everything run by electricity will eventually be connected to the Internet. Get ahead of the Internet of Things revolution and join Akvelon expert and IoT industry leader, Sergey Grebnov, in his session at @ThingsExpo, for an educational dive into the world of managing your home, workplace and all the devices they contain with the power of machine-based AI and intelligent Bot services for a completely streamlined experience.
21st International Cloud Expo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Me...