Buying a Pre-Selling Property? What are the PROS and CONS?

First off, what is pre-selling? This means that the property being sold is still under construction or even on the planning stage yet. The developer may or may not have broken ground for the property so there is no development yet. Now you think, “So am I buying an imaginary property?”. Not necessarily. Before you run for the hills, let’s break this down. There can be some good points in buying pre-selling properties.

Pros

Lower Price – Since the developer have yet to spend for the property, he will be unable and should not value his property too much. Pre-selling properties are promising investments since their market value can and will increase by project completion.

Locked in against Inflation – If you buy your unit earlier in the game, and construction materials suddenly shoot up in price, the cost will not be passed on to you. The developer may only re-price his unsold units higher.

More options – Since most buyers shy away from pre-selling properties, you have the liberty to choose preferred locations. Usually, the nearer the completion date, the more buyers come in. Thus choice locations become scarce as they get snapped up. Remember, it is first come, first served.

Slower and lower payment pace – since pre-selling units are cheaper than RFO (ready for occupancy) units, the required down payment will of course the lower. Not only in peso value, but the percentage as well. For example, RFO units may require minimum of 20% cash out, while pre-selling units may require 10% cash out with the balance in easy affordable installment terms.

Cons

Time Table – Since the property is not yet finished or has not even began, you run the risk of waiting for a long time to move in or lease out your investment should the developer fail to deliver on time.

Unexpected Results – the developer did deliver but the property was not as you expected. There may be changes in the floor plan, unit specifications or amenities, as opposed to what was initially presented to you. The developer is directed to inform the buyer prior to implementing.

Depending on what kind of investor you are, the pros may outweigh the cons. Some of my best selling properties are actually under a developer who pre-sells. This is because his properties are selling like hot cakes, before the subdivision is finished, most if not all the units are sold already. It’s a reputable developer with a veritable list of accomplished projects under his belt. But this is obviously not the case across all developers.

How to make sure you lessen the risk as much as possible? Here are some tips for you.

Contact a credible licensed real estate broker who can assist you in choosing a property from a reputable developer.

1. Ask the right questions.

2. Does the property have a license to sell?

3. Are there concerns on the master title of the property?

4. Is the developer licensed with the Housing and Land Use Regulatory Board (HLURB)?

5. Compute for your ability to invest in a property that you may not be able to use for a long time. Make sure you can afford to part with that portion of your income for the property while still paying for rent in your existing home.

6. Do your research. Does the property have the potential? Will development continue or headed in your property’s area? Again, your broker can help you out on this.

Investing in a pre-selling property may it be a condo or a house and lot package doesn’t have to be scary. It may be even be the best option for you. Contact us today on how and where to start your property investment. Cheers!