Pre-sale in property markets are great avenues investors and buyers can acquire a property at a really great prices. It is an opportunity to amass huge wealth since the property can appreciates in value by the time the project is completed and even beyond. However, because presale buyers are early investors, it has its own risk which is largely due to the unpredictability of the market.
What are pre sales?
These are properties that are undergoing construction or that are still on a paper plan but yet are made available for purchase to investors and the ordinary home buyers. By investing on a home pre sale, you are expecting the project will be completed within a given period and readied for moving in.
Some Pros and Cons
The bright side is that pre-sale properties are generally acquired at much cheaper prices than the fully built and readied properties. They can be a source of great profit since properties tends to appreciate in value with time and by the time the property is readied, it can be resold at greater profit. There is also the opportunity to delay a mortgage payment after approval, up until the property is completed and hence enough time to save before making a down payment.
On the other hand, since the buyers/investors are paying with just a floor plan before them and some elements of imagination. The waiting time can be pretty long before the project is fully completed. There is also the possibility of actually making a loss on the investment since market values cannot be predicted and can plunge by the time the property is ready. Lastly, there is the risk the property developed in the end is of really low quality and not actually worth the ask price of the property.
To minimize the risk associated with pre-sales, care must be taken to ensure that the proposed property does meet certain important expectations to avoid loss of wealth. This can be achieved by:
- Selecting a Trustworthy developer – A little investigation on the developer of the supposed property is one way to ensure good and a quality finished product. Only go for a property whose developer has enough experience, good track record and is better equipped to deliver.
- Selecting the right Location – While property market value could fluctuate and become quite unpredictable, selecting a property in strategic locations and cities ensures that the value of the property will be less likely to depreciate in the future. Property value depreciation are in most cases caused by like of buyer or surplus properties with fewer interest. For instance when, a town or city losses a few companies causes lack of jobs and leaving very little incentive for anyone to stay in such a place.
- Consulting mortgage specialist and real estate professional – This is an important step to take when moving into a pre-sale. The real estate agents have been in the game for a long time and can always intuitively provide the right path to take. Involving a specialist in real estate will help in making sense of everything involved, including the contract signing and property plan assessment.