Pros and Cons of Investing in Pre-selling Properties

Pre-selling properties is a common term in the real estate industry. Whether for a first time homeowner or a long-time property investor, pre selling condos or pre selling units are good value for money investments because the properties are sold under market value. Pre selling properties make asset acquisition affordable with a increased chances of generating revenue.

What are pre-selling properties?

A pre-selling unit or property, whether a townhouse, condominium, or house and lot, are residential real estate properties sold by a develop prior to its completion. Also called "off-the plan properties," a pre selling property at a pre selling stage is released to the public during the time it could be undergoing construction phase or while it is in its planning stages.

This means that prospective investors are presented with the blueprint of the pre selling condos or only the a model showroom of the unit.

This investment scheme allows property developers to finance the construction of the project at the same time making property purchase for investors affordable. However, studying the potential risks and rewards of pre-selling properties is highly recommended prior to placing your down payment.

Pros of Buying Pre-selling Properties

Lower introductory price than ready for occupancy units

Pre sold properties tend to cost less than purchasing finished units. Low budget investors can be easily turned off by ready for occupancy properties which is why a pre selling property can put an investor at an advantage due to its affordable introductory price.

Since the property does not exist as at the time of purchase, a pre-selling property can cost 30% less than the price of a ready for occupancy unit. It is important to remember that the price is affected by different factors such as location, size, amenities and the credibility of the developer.

Flexible Payment Schemes

Pre selling units are popular among buyers because its developers offer flexible payment options that make it convenient for investors to meet their monthly payments, often times without interest. Developers can even extend discounts on down payments and offer in-house financing options.

Choose the Best Unit Option

One of the most salient advantages of buying a unit in pre selling project is having the freedom to select a unit that's most suitable to your lifestyle. Buyers can view model units of a pre selling condo and be assured they will be near basic amenities or check unit sizes and opt for ones with bigger cuts.

A Promising Investment

While investors have to patiently wait until a pre selling property is completed and ready for use, they can be assured of a future profit. Properties appreciate over time and once the developer completes projects, properties' value rise. This means when you purchase pre selling units, you buy at a lower price and have the option to sell it or rent it out to earn passive income.


Cons of Buying Pre-selling Properties

Delay in Turnover Date

Among the risks of investing in pre selling condos is the possible change of date in turnover. While the target completion date is disclosed to buyers, a lot of factors can cause adjustments to this crucial date. Pre sale contracts often include delay clauses which buy developers extra time to deliver for up to a year or more.

Changes Without Prior Notice

The pre selling contract would commonly state that the property will be constructed with specific finishes and materials. It would be wise to have awareness that the property developer still has the right to make alterations in the finishes and materials in certain circumstances without compromising quality.

It is important for buyers to know that there can be changes in unit sizes, floor plan, finishing, features, or amenities.


Failure of Property Completion

Another big risk in pre selling property investments is that investors may not get a refund for a deposit or downpayment in case the pre-selling project fails to be completed or if the developer undergoes a financial crisis or bankruptcy.

This is why buying from a reputable developer is important. Always consider the reputation of the developers. Research and know the projects they have completed and strive to know their track record in delivering quality properties. One key thing to know is if they have the license to sell pre selling real estate properties.


Key Takeaways

Acquiring any real estate property involves a big financial decision. Investing in a property during its pre-selling stage is no exception to this. It is important to have enough details about both the developer and the project, to triple check your financial means, and to not rush into pre-selling contracts at once.

When in doubt, it is highly recommended to seek the services of a registered and licensed real estate broker to help you negotiate and assist you in the purchasing process.