SYS-CON MEDIA Authors: Pat Romanski, Yeshim Deniz, Janakiram MSV, Liz McMillan, Elizabeth White

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
Docker and Kubernetes are key elements of modern cloud native deployment automations. After building your microservices, common practice is to create docker images and create YAML files to automate the deployment with Docker and Kubernetes. Writing these YAMLs, Dockerfile descriptors are really painful and error prone.Ballerina is a new cloud-native programing language which understands the architecture around it - the compiler is environment aware of microservices directly deployable into infra...
Only the most exceptional IBMers are appointed with the rare distinction of IBM Fellow, the highest technical honor in the company. Shankar has also received the prestigious Outstanding Technical Achievement Award three times - an accomplishment befitting only the most innovative thinkers. Shankar Kalyana is among the most respected strategists in the global technology industry. As CTO, with over 32 years of IT experience, Mr. Kalyana has architected, designed, developed, and implemented custom ...
At CloudEXPO Silicon Valley, June 24-26, 2019, Digital Transformation (DX) is a major focus with expanded DevOpsSUMMIT and FinTechEXPO programs within the DXWorldEXPO agenda. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of business. Only 12% still survive. Similar percentages are found throug...
10ZiG Technology is a leading provider of endpoints for a Virtual Desktop Infrastructure environment. Our fast and reliable hardware is VMware, Citrix and Microsoft ready and designed to handle all ranges of usage - from task-based to sophisticated CAD/CAM users. 10ZiG prides itself in being one of the only companies whose sole focus is in Thin Clients and Zero Clients for VDI. This focus allows us to provide a truly unique level of personal service and customization that is a rare find in th...
As you know, enterprise IT conversation over the past year have often centered upon the open-source Kubernetes container orchestration system. In fact, Kubernetes has emerged as the key technology -- and even primary platform -- of cloud migrations for a wide variety of organizations. Kubernetes is critical to forward-looking enterprises that continue to push their IT infrastructures toward maximum functionality, scalability, and flexibility. As they do so, IT professionals are also embr...

CloudBees, Inc., the hub of enterprise Jenkins and DevOps, today announced a major investment in Kubernetes technology across all areas of the business. CloudBees has made Kubernetes a key part of its lon...

Signs of a shift in the usage of public clouds are everywhere. Previously, as organizations outgrew old IT methods, the natural answer was to try the public cloud approach; however, the public platform alone is not a complete solution. Complaints include unpredictable/escalating costs and mounting security concerns in the public cloud. Ultimately, public cloud adoption can ultimately mean a shift of IT pains instead of a resolution. That's why the move to hybrid, custom, and multi-cloud will ...
The Japan External Trade Organization (JETRO) is a non-profit organization that provides business support services to companies expanding to Japan. With the support of JETRO's dedicated staff, clients can incorporate their business; receive visa, immigration, and HR support; find dedicated office space; identify local government subsidies; get tailored market studies; and more.
While a hybrid cloud can ease that transition, designing and deploy that hybrid cloud still offers challenges for organizations concerned about lack of available cloud skillsets within their organization. Managed service providers offer a unique opportunity to fill those gaps and get organizations of all sizes on a hybrid cloud that meets their comfort level, while delivering enhanced benefits for cost, efficiency, agility, mobility, and elasticity.
Signs of a shift in the usage of public clouds are everywhere Previously, as organizations outgrew old IT methods, the natural answer was to try the public cloud approach; however, the public platform alone is not a complete solutionThe move to hybrid, custom, and multi-cloud will become more and more prevalent At the heart of this technology trend exists a custom solution to meet the needs and concerns of these organizations, including compliance, security, and cost issues Blending Ser...
Serverless Computing or Functions as a Service (FaaS) is gaining momentum. Amazon is fueling the innovation by expanding Lambda to edge devices and content distribution network. IBM, Microsoft, and Google have their own FaaS offerings in the public cloud. There are over half-a-dozen open source serverless projects that are getting the attention of developers.
If you are part of the cloud development community, you certainly know about “serverless computing,” almost a misnomer. Because it implies there are no servers which is untrue. However the servers are hidden from the developers. This model eliminates operational complexity and increases developer productivity. We came from monolithic computing to client-server to services to microservices to the serverless model. In other words, our systems have slowly “dissolved” from monolithic to function-...
Docker is sweeping across startups and enterprises alike, changing the way we build and ship applications. It's the most prominent and widely known software container platform, and it's particularly useful for eliminating common challenges when collaborating on code (like the "it works on my machine" phenomenon that most devs know all too well). With Docker, you can run and manage apps side-by-side - in isolated containers - resulting in better compute density. It's something that many developer...
When a company wants to develop an application, it must worry about many aspects: selecting the infrastructure, building the technical stack, defining the storage strategy, configuring networks, setting up monitoring and logging, and on top of that, the company needs to worry about high availability, flexibility, scalability, data processing, machine learning, etc. Going to the cloud infrastructure can help you solving these problems to a level, but what if we have a better way to do things. ...
The KCSP program is a pre-qualified tier of vetted service providers that offer Kubernetes support, consulting, professional services and training for organizations embarking on their Kubernetes journey. The KCSP program ensures that enterprises get the support they're looking for to roll out new applications more quickly and more efficiently than before, while feeling secure that there's a trusted and vetted partner that's available to support their production and operational needs.