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August 18, 2011

Why Is It Wiser to Buy Pre-Selling Condo Units?

Before I even discuss the reasons behind the title above. I suggest you read first on my post entitled , Questions you should ask before investing in pre-selling condos. What I will present below might get you to jump right into buying pre-selling units without really understanding the risks involved in it. It is either your condo gets delivered and you’re happy (the best scenario); the delivery is delayed and not as you expected it to be; or it doesn’t get delivered at all (Believe me, it happens). Now if you already read the said post and you still feel uneasy with owning pre-selling units, that only means you have low risk tolerance and I suggest you purchase an RFO (Ready for Occupancy) unit instead. This kind of investment is great only if you don’t have immediate need to occupy the unit and if you fully understand the risks involved in it.

So what are the reasons why it is wiser to buy when it’s pre-selling?

1. Price is at its lowest – This is so true because you’re not buying a tangible unit yet. Developers initially offer it at the lowest price as a “come on” to investors like you so they can use your money to finance the construction. Several price increases happen as the project approaches completion and therefore giving a big yield on your investment.

2. Easier Payment Terms – The down payment which is usually 20% of the total contract price is spread over the number of months prior to completion or RFO date without additional interest. So for example, a unit worth 1.8 million that will be completed in 36 months (3 years) and has a 20% down payment of 360,000.00 would result to a monthly equal payment of 10,000.00 for 3 years. Although there is an advantage in paying the down payment in spot cash because of a discount of up to 10%, but you can definitely grow your money more than that in three years if you are financially literate and therefore this kind of arrangement will be very advantageous to you.

3. You can choose the best unit location – Generally, there is ample inventory of units in the first 6-9 months after the project launch. Please note that I used the word “Generally” because I know some projects like DMCI’s Accolade Place in P. Tuazon Cubao that is almost sold out in just 6 months after its launching. The advantage of this is that you can choose a unit according to your preferences like if it’s facing north, facing the morning sun or facing the amenities or you can choose units with lucky numbers like 8 and 7. This advantage is much more appreciated by people who are into Feng-Shui.

4. Faster and bigger yield on your investment – I got this analogy from a real estate consultant in one of REBAP’s business meetings. (Real Estate Brokers Association of the Philippines). He mentioned that he solely uses this analogy to present the advantage of buying pre-selling condo units then he drew a graph like the one below.

This shows the great advantage of buying pre-selling units because as mentioned in number 2, the down payment is spread in several equal payments thus its value remains the same no matter how long the payment period is. It is a fact though that because of inflation which averaged 4.78% in the last 5 years here in the Philippines, the buying power of that same monthly payment decreases as time goes by. But since it was already set as payment for the pre-selling unit, you are in effect hedged over inflation. Meaning it does not affect the value of your money. More importantly, property increase its value over time and in the case of pre-selling condos, it increases 2-3 times prior to completion with an average total increase of not less than 40% of its original price.

See the great advantage? While other people think owning a pre-selling condo unit is too risky, here you are with greater understanding of how you can minimize the risks and with the knowledge of its advantages. You are definitely a better condo investor now.

Live a beautiful life!

Ryan Rillorta
Real Estate Broker
PRC Reg. # 5578

4 comments:

  1. Question. I took smdc light res... its not yet finished, i'm settling to cebu. is it possible to sell this? same price as i have invested?

    ReplyDelete
    Replies
    1. Yes you can. It would be better if you postpone selling it until its ready for occupancy so you can earn from your investment. But if you need the money now. It would sell faster it it is priced below its current price. Seek help from the broker who sold you the unit.

      Delete
  2. Now I understand the benefits of buying the pre-selling

    ReplyDelete
  3. This is such a great resource that you are providing and you give it away for free. I enjoyed this and I will be back for more. Thanks

    ReplyDelete

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