When investing in property, the way you finance plays a big role in managing cash flow. From choosing the most competitive mortgage, balancing initial capital outlay to understanding when you will make your first return, attention to detail is imperative. One strategy you may have come across when financing deals is the delayed purchase. Let’s dive into what a delayed purchase looks like and whether this could be a good move for your next investment.
What is A Delayed Purchase?
A delayed property purchase is simply where you exchange contracts and mutually agree to postpone completion to a later date. This allows property investors to secure a deal whilst still waiting on final confirmation for planning permission or releasing capital to fund the transaction. Naturally, this is a popular way for tactful property investors to finance a purchase that is safe and viable. As one of the best property investment advisors in the UK we specialise in navigating you to the best investments and finance options to maximise your returns.
How Does A Delayed Purchase Work?
The steps to structuring a delayed purchase are as follows;
- Source a property opportunity that ticks all your boxes and you want to move ahead with.
- Have an offer accepted and transfer the transaction to your solicitor to proceed with searches and contracts.
- Your solicitor will set a date for exchange with a delayed completion that both parties agree to.
- Completion takes place on the set date.
Why Do Investors Choose To Use The Delayed Purchase?
There are several reasons an investor may opt for a delayed purchase of a property. The key reasons are waiting for planning permission, allowing time to undergo renovations or waiting on finance. Another reason for delayed purchase can be when the buyer is relocating or waiting for a tenancy to expire. It is important to get a solicitor to draft a watertight contract to make sure you are protected. Every deal is subjective and your contract will reflect the specific terms, dates and agreements that have been made between the buyer and the seller.
What Are The Benefits Of The Delayed Purchase Strategy?
Choosing to delay completion of a property purchase can be beneficial in many ways. Here are some of the key reasons it is a popular strategy;
Security
Purchasing and delaying completion can provide investors with peace of mind in the sense they can ensure all of their needs are met before completing. This may mean undergoing refurbishments or waiting for a tenant to leave before they are the legal owners of the property and committed to making the full purchase price.
Cash flow
A key benefit is allowing the investor to manage cash flow. For example if you are waiting on raising finance from the sale of another property and do now want to miss out on a deal.
Planning permission
In some cases an investor may be waiting on planning permission to undergo works and make changes to the property in order to add value.
Time
Time is precious and property purchases are all about timing. Having a longer time between exchange and completion allows the investor to arrange any works that need to be carried out and even line up a tenant to bring an income as soon as they complete.
Added Value
The added value to the property between exchange and completion increases the equity in the asset for the investor on completion.
If you are considering this investment strategy, it is clear there are many lucrative benefits However it is important to also be aware of the risks. The seller could pull out of the transaction or you could end up losing your deposit if contracts are not thoroughly drafted to reflect mutual agreements. Choosing an area with strong market conditions and growth potential is key to success, speaking to our team can make sure you source the right opportunity. As always, legal and financial advice is imperative in setting up this payment structure. From solicitors to lenders, at William Vale our exceptional team is here to help you invest in confidence.
The Final Highlights
The delayed purchase is an effective and smart way to finance a property purchase. It is especially useful for investors looking to make refurbishments, waiting for planning permissions or to raise cash for the completion. Expert legal advice and having the right team by your side is key to success and ensuring the contracts accurately reflect both parties wishes and interests. There are many benefits to delaying completion for investors from managing cash flow to added value. It all starts with finding the right opportunity. Ready to discuss your property goals? Book a strategy call and take the first step towards your next investment below.