Episode 2 Rationale – Real Estate Investing: Practicality of Owning A Pre-Selling Condo
February 23, 2018
Why should I buy pre-selling condo if I can already move-in to Ready- for- Occupancy (RFO) unit? Pre-selling condo is risky, scary, not worth it, not ideal. Are these all true? Have you done your research? Is it really good to invest in a pre-selling condo?
What is a pre-selling condo unit? It is defined as units being sold before its completion, during its construction, or while still in the planning stages. These mean that the property still does not exist and the developer is yet to break ground for the project. Delivery date may vary but from start to finish, it may take 1 to 5 years depending on the type (size or height) of the building and on the developer. In short, it really takes time for pre-selling units to materialize. That means you “take the risks” when you invest in a pre-selling condo.
Let us give you the rationale why you should consider pre-selling condo to be a very good reason to invest and earn at the same time.
Lower Valued– Will you argue when you are offered a low price for an item that has a very good value for your money? I don’t think so. Pre-selling units “Come On” is to offer a very good investing rate. For some property developers who do not have all the budget to build a condominium, they use this money to finance the construction of the building that is why buying at this stage will give you an excellent deal for your hard earned money. Units are normally 30% or lower than the finished unit price. You are also protected from future price escalation if you purchase during this time. Price normally increases during the course of construction.
Flexible Payment Scheme – Real estate developers offer different schemes and promos during this stage of construction. Some would offer low initial investment and amortization spread out in 5 years or more. Some would offer stretched down-payment wherein the monthly payment is sometimes lower than the amortization. With this type of scheme, anyone can have the power to own a condominium unit. For some developers, they would give big discounts for a spot on cash down-payments or they would offer 10% to 15% discount paired with flexible payment schemes. And for the others, they might offer down payment spreadable and payable in 3 years. Some of the schemes to look out for from developers are — no down payment, low down payment, low monthly amortization, longer years of payment and no lump sum payment to name a few. Those really sounds too good to be true. But really, these developers can cook-up really good deals during this stage of construction.
Better units – Most developers create enticing showrooms that would really give you the “Wow Factor” you will need to say “Yes Sign me up!” or “You got me at hello” … this is not impossible. Nowadays, developers really create the best condo units for your money. At this stage, you can choose the unit and location according to your preference. You may choose to have a view of the Central Business District, the Mall, and the amenities or even have a good view of the sunrise or the sunset. Not only that, if you believe in Feng Shui, you can also choose your favorite letter or number. I know, I don’t need to convince you further… the better units deal has a good convincing power to make you decide on purchasing a pre-selling unit.
Equity – Purchasing at the pre-selling stage gives you the opportunity to earn on real estate equity even if your unit is not yet turned over. What that means—equity refers to the difference between what the property is worth and what the owner owes from the developer or financing institution. The reason is that the value of the unit increases up to 2 to 3 times prior to completion. Wherein the average total increase is not less than 40% of its original price.
If you decide to resell the unit after the turnover, you can expect a good deal as the Pre-sell value of units yields a higher value than the amount you purchased it. If on the other hand, you decide to rent out the unit, you will also get a higher rental value for your unit especially if it is strategically located in developing or developed areas. Deciding to buy at this stage makes it a good deal to own a pre-selling condo unit. That does sound really good right?!
Well, at this point, I know you are already convinced at how profitable owning a pre-selling condo is. We will give you more tips on purchasing pre-selling condo units. (Read the First Episode – Tips.)
