You’re probably sold on the idea of condo living, but should you buy it during its pre-selling phase?
Pre-selling, or “off-the-plan” properties as it is known in the West, are pieces of real estate that are being sold by a real estate developer in advance before its actual construction and completion. These pre-selling properties are either condominiums, townhouses, and house and lots.
With the Philippines now being recognized on a global scale for economic development, it is therefore inevitable to see many investors lock in on these “property investments,” as it promises a high appreciation in value when sold after several years, and a steady source of income when rented out. This fact is further proven by the figures of take-up of pre-selling condominium units in Metro Manila – which is at an all-time high with 52,600 units in 2017, higher than the prior year, and the highest historically for the country’s capital.
Buying a condo unit sure sounds captivating, but you should still do your research to know its advantages and disadvantages. Here’s a list of what you should know about a pre-selling condo.
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ADVANTAGES
1. It’s cheaper – Buying a pre-selling condo unit is normally cheaper. Since the project is yet to be seen, real estate developers offer a low introductory price, flexible payment scheme of up to 5 years downpayment period (spread out amortization), and big discounts! In the absence of the physical unit, you can get it at a usual cut-rate price of 30-50 percent OFF compared to the price of a finished or ready for occupancy unit.
This lessens the burden of your monthly requirements. If you are keen to invest in a condo for your future – whether for leasing or reselling – you should NEVER buy from am RFO project. Pre-selling, always.
2. It’s a way to choose the best unit possible – In real estate, it’s always on a first come first serve basis. By getting into a pre-selling deal, you can pick the best unit according to your preference, such as the unit with best amenity view, the unit away from the hallway, the unit with your lucky number/s, or the unit in the penthouse level. You get the privilege to choose in the project launching stage compared to when it’s near completion, or full completion.
3. It gives a faster, and bigger yield investment – All properties appreciate over time. In the case of pre-selling condos, it increases a couple of times prior to completion, then is subject to another set of increases once it’s completed – giving you a bigger yield. The price increase during the pre-selling stage is usually not less than 40% of its original price.
DISADVANTAGES
1. It is subject to change – When buying a pre-selling condo, you’ll encounter many disclaimers like “more or less,” and “subject to change without prior notice.” That’s because there will be changes in the finished unit such as its orientation, size, finishing, features, etc. It is inevitable. If you don’t regularly check with the Construction team, you might be disappointed for acquiring a unit that falls below your expectations. Lastly, real estate developers always have an “RFO Date” for their projects. Make sure you only get from a trusted and credible developer to make sure that there are no turnover delays!
2. It takes time (years) – As this is the opposite of an RFO unit, you can’t inspect the condo unit before making a final decision. You purchased because you trusted the developer, and believed in the project and its marketing promise. It will take years before the project is completed, and you can’t use it right away. Chances are – when you purchase a pre-selling condo – the real estate developer hasn’t started with the excavation yet.
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There are always proven claims, as well as reasonable criticisms when buying a pre-selling condo. What you should know – the advantages outweigh the disadvantages for practical reasons.
If you think it is a wise decision and you have the financial capability to make it come true, do it!
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