Did you know that one in ten UK properties are now sold without being publicly marketed? In London, the figures are even higher, and the so-called ‘off market’ property sector looks poised to go from strength to strength.
The question many investors are therefore asking themselves is: “Is it good to buy a property off market?” That’s exactly why we’ve created this guide to investing in off market properties, looking at the pros and cons to help individuals like yourself decide whether to go down this route or not. As a dedicated property investment company for over 20 years with a range of off market properties in our portfolio, we’re perfectly positioned to advise on this subject.
Firstly though, what exactly is an off market property deal?
Off market property investment guide
What is an off market property deal?
Off-market properties are those that aren’t publicly listed or advertised for sale through traditional channels, like a multiple listing service (MLS) or a real estate website. They are instead sold through private transactions. Below are some key characteristics of off-market properties:
- Limited public exposure: Off-market properties are not widely advertised to the general public. Developers often prefer to maintain privacy or test the waters discreetly before making a public listing.
- Non-traditional sales: Off-market properties often involve alternative sales methods, such as auctions, pocket listings (properties held privately by agents), or direct negotiations between buyers and developers.
- Seller’s discretion: Developers may choose to keep their property off the market for various reasons, including a desire for privacy, to avoid open houses and showings, or to keep it available for exclusive clientele, such as property investors. With our help, you can become one of these exclusive investors with access to these select properties.
- Word-of-mouth referrals: Many off-market transactions occur through word-of-mouth referrals. Friends, family, or acquaintances may inform potential buyers of available off-market properties.
What we like about off market property investment
- Reduced competition: Off-market properties typically have fewer potential buyers, leading to less competition and reducing the possibility of bidding wars. This can provide investors with an advantage in negotiations and potentially result in better pricing and terms.
- Exclusivity: Off-market properties are naturally more exclusive opportunities seeing as they are not widely available to the general public. This exclusivity can give investors access to unique properties that they wouldn’t otherwise have found.
- Privacy and discretion: Sellers of off-market properties often value privacy and discretion. This can lead to a more confidential transaction process, which can be appealing to both parties.
- Cost savings for sellers: Off-market properties generally have lower marketing and advertising costs, which can lead to cost savings for sellers.
- Investment control: Off-market properties can offer buyers more control over the transaction process, as they’re able to negotiate directly with sellers and craft terms that meet their specific investment goals. Sellers of off-market properties may be more open to flexible terms and conditions, including price negotiation, closing timelines, and accommodating various contingencies.
- Reduced time on market: Properties listed publicly can spend significant time on the market, something that potential buyers may view as a red flag. Consequently, off-market properties can be more appealing to prospective purchasers.
Areas of consideration with off market property investment
- Limited property selection: Investors will have fewer options to choose from, potentially limiting their ability to find the right property for their investment goals.
- Network dependency: Access to off-market properties often relies on building a network within the real estate industry. Investors without established connections may find it challenging to access these exclusive opportunities.
- Higher due diligence: With fewer available details and public information about off-market properties, investors may need to conduct more extensive due diligence. This can involve extra effort and costs related to property inspections, financial analysis, and verifying the property’s condition.
- Transaction complexity: Off-market transactions can sometimes be more complex than publicly listed deals. Without a structured listing process, investors may need to navigate the transaction with less guidance and may encounter obstacles that don’t typically arise in public deals.
- Market knowledge: In the absence of public listings and market data, investors need a deep understanding of the local real estate market. Lacking this knowledge can lead to missed opportunities or investing in less desirable properties.
- Market liquidity and resale challenges: Selling an off-market property can be challenging seeing as the pool of potential buyers is smaller than it is with listed real estate.
The verdict: is off market property investment worth it?
When considering whether to invest in off market properties, there are various factors to take into account, such as your financial situation and risk tolerance. Generally speaking, we believe that this presents an attractive opportunity for property investors, though it is strongly recommended to follow the steps outlined below before making any commitments:
- Evaluate your risk tolerance: Similar to any investment, off market property investment carries a unique set of risks. Therefore, it’s imperative to thoroughly assess your comfort level with these risks before purchasing a property.
- Conduct comprehensive market research: It is essential to engage in extensive market research, considering factors like the location and the specific attributes of potential properties. This research should encompass an analysis of the local economy and the appeal of the property type to potential renters if you’re purchasing a buy-to-let.
- Choose your property type: Determine the kind of property that best fits your investment strategy, whether it’s residential, commercial, industrial, or a mix. Each type comes with its own set of considerations and potential risks.
- Develop an exit strategy: Consider your future plans for this investment, bearing in mind that selling off market properties can be a challenging endeavour. Having a well-defined exit strategy is, therefore, crucial to your investment approach.
- Consult a property investment specialist: Seeking guidance from a property investment specialist is highly advisable considering the secretive nature of this sector. Professionals, such as those at Alesco, possess exclusive access to the off market sector and can help identify prime investment properties in the first instance, and navigate the intricacies of this type of purchase.
How do I access off market property?
If you are wondering how to invest in off market properties, Alesco is here to help. Gain access to our exclusive off market portfolio today, and lean on our wealth of experience, expert market insights, and profound understanding of off market property investment to ensure you make the right choices from the off. In addition to this, we’ll assist you with steps like the purchase process and performing due diligence.
Get in touch with us for more information or to make an inquiry.
Written by: Ben Whitaker
Experienced professional working in the real estate investments sector. Assisting and advising clients on the acquisition of property across a range of asset classes, with view to achieving robust return on investment.