In this Q&A, we explain what pre-selling properties are, and what makes them an attractive investment option.
Q: What is a pre-selling property?
A: Buying real estate requires a good strategy and plenty of common sense. This is especially true if one is buying a property that is yet to be built – often called a pre-selling property or off-plan property in other parts of the world.
These properties are sold to buyers at the very early stage of development (usually at the project’s launch date). At this point, there is nothing yet but a plot of land, a plan, a building permit, a scale model, and, in some cases, a swanky showroom.
Property investors like to purchase pre-selling properties in the hope of making a profit through capital gains. This is because when one buys a pre-selling property, the buyer can lock in the purchase of the property at its current market price, and see the property’s value increase during its construction. By the time the property is completed (usually up to five years in the case of high-rise condos in the Philippines), the buyer can sell the property and earn a profit. In addition, because many developers are offering pre-selling properties in order to finance the development itself, early buyers are rewarded with a discounted price. This is promoted by offering first pick of the best units, and an attractive payment scheme.
It is important to note that for a pre-selling property to be potentially profitable, it must be located in an attractive area, replete with infrastructure (either already built or due to be built within the next few years). Hence, real estate’s old adage “location, location, location” holds true here.
