Pre-selling happens when investors buy properties while they are still being constructed or before they are constructed. It can also be referred to as off-plan properties, as the buyers buy nothing else but the plan. The majority of the property developers are adopting this strategy because it helps finance the project.
However, despite all the gains associated with these types of investments, they also have their unique challenges. At times, the investor may end up frustrated when this plan fails to meet his expectations. It also faces the risk of the area stagnating in terms of growth since the turnover period set is two to three years. Therefore, you have no assurance that the area will bring the expected capital growth or return on investment.
Consequently, you can protect your venture from all these risks by doing the following:
Owners’ equity for the down payment
Even if you intend to finance your plan to fund your investment through a loan, you will still be required to contribute a certain proportion of capital. It could be 20% of the buying price or more. Some property developers also demand a reservation fee. The reservation fee would then form part of your down payment should you opt to continue with the project.
At times, the reservation fee can be dropped if the prospective buyer chooses not to continue with the purchase. Additionally, it is also prudent to have money amounting to 5% of the total buying cost. This amount is used to cover taxes and other miscellaneous fees associated with the purchase.
Choose your property developer wisely
At times, investors are scared of buying pre-selling condos simply because they fear that the final product will not be what they were initially promised or the venture may not materialize at all. In recent times, this has happened to unsuspecting investors, making them lose all their capital. Therefore, it’s advisable that you do your research about some of the best property developers dealing with the pre-selling condo properties in Ortigas, Pasig and nearby locations.
You can avoid problems by choosing a property developer carefully. You should go for those developers who are already well established, as they have a strong financial base, a name to protect, and are unlikely to let you down. Some property developing companies are strained financially and are, therefore, on the lookout for buyers to help them meet their financial obligations. Therefore, if they come across any problem during the project implementation stage, then the probability of the project not materializing is very high.
Location of the property
The location of the property is significant. It is said that a bad house on a strategic location is better compared to a good house in a bad place. The statement is also true for pre-selling condominiums. However, this does not mean you should only focus on those properties located at premier locations, such as towns and cities. Other areas, such as the outskirts of urban areas, are not costly and their growth potential is high.
Before you make any procurement, you should research the location. Focus on knowing whether those areas have functional road networks and whether they are susceptible to flooding and other risks. Understanding some of these things would enable you to plan your investment wisely.
If you are looking for an excellent business opportunity, the real estate is the way to go as it can help you achieve the financial freedom you desire. However, if you are a beginner in this business, you should not jump in blindly. Always get enough information that can provide you with a good start in this exciting venture.