Is a pre-selling condo a worthy investment? Find out what benefits you can get in purchasing a unit ahead of its completion.
Q: Why should I invest in a pre-selling condo unit?
A: A condo is considered to be a pre-selling unit when it is up for sale during the project’s planning stages, during its construction, and before its completion. So if you don’t get a physical unit even after you’ve given a down payment, why is it growing in popularity as an investment option?
It costs less than a resale or ready-for-occupancy (RFO) unit
An RFO or ready for occupancy unit is one that a buyer can use right away, whether as a resident or as a lessor. But the thing about an RFO unit is that it costs more than a pre-selling condo since you’re buying a finished unit. With a pre-selling unit, not only do you get to pay about 30% less than you would an RFO, some developers even offer lower down-payments and flexible payment terms, making things financially easier for you.
You have more, and better, options
Once the project’s been completed and most of the units have been picked up by early buyers, what you’ll have left are units that might not bring in as much in terms of return as, say, units located on a higher floor, or those facing a better view. Also, most of the new condos in construction these days have improved design aesthetic, added amenities, and even energy-efficient features such as better air circulation and use of natural light. If you’re buying as an investor, this means when you offer it up for sale or lease, you know you can ask for more compared to an older unit.
There is a possibility of a higher investment return
Depending on certain factors such as the unit’s location and the real estate market conditions, a pre-selling unit has the potential to earn you more money once it’s completed. In some instances, a condo’s value increases enough that you can resell the unit for twice what you paid for before it was finished.
Be wary, though, that there are some drawbacks in purchasing a pre-selling condo unit. There are some cases where the project’s completion gets delayed, or it doesn’t get finished at all due to funding shortage or bankruptcy. Also, there are instances where the delivered unit is not exactly what the buyer pictured. If the contract stipulates that things are bound to “change without prior notice,” you might get a unit with a different floor plan, finishing, or amenities.
The best way you can protect yourself should you push through with your purchase of a pre-selling unit is by choosing a project built by a reputable developer. It’s also recommended that you consult with a lawyer, who can explain the terms of the pre-selling contract before you sign it.
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