Buying a Pre-selling Condo & an In-depth Guide to computing your ROI

May 12, 2023

Nothing is more enticing than investing in and purchasing a pre-selling condo at a time when real estate properties are being built left and right. The leading condo builders in the Philippines have pre-sold condos that offer early buyers special discounts and the prospect of capital growth. It is crucial that you are aware of the key advice for your investments and purchasing a condo that isn't yet on the market if you are considering investing.

What is a pre-selling condo?

Preselling condos refers to the practice of selling condominiums well in advance of the project's completion, frequently while the building is still being built or while rough blueprints are being created. A preselling condo, to put it another way, is one that has not yet been built or is still in the development stage at the time of purchase.

Additionally, it has been asserted that pre-selling condos enables builders to raise money for the initial investment in their ventures while also using market value by giving potential buyers the chance to purchase apartments for a lower price.

How can investors benefit from preselling properties?

It offers lower rates and flexible payment options.

For first-time condo buyers, preselling condos, which typically provide discounts of 30% to 40% off the price of a finished unit, is a popular option. By acquiring a property at a discount and selling it later, you can maximize your return. The best time to purchase and sell a condo is undoubtedly during the pre-selling phase, if you're asking when the best time is to do so.

Further discounts or payment plans with low down payments—as little as 10% returned over 3 years—are also offered by some developers. These plans can be financed by the developer's internal financing or a bank home loan. Developers who are pre-selling homes may provide more enticing terms to entice buyers, such as lower down payments.

More condo unit options are likely to be available.

Buyers are able to select the unit location that best meets their needs because preselling properties are virtual. You have first pick of the best units, and you get to pick the floor and unit orientation of the pre-selling units that best suit your needs.

The less congested streets, more convenient location, and more beautiful scenery can also tempt you to visit. Vista Residences' pre-selling condominiums located near universities like the Kizuna Heights in Vito Cruz, Manila, are a few examples of properties that are in prime locations. One benefit of buying a home for the first time is having the choice to select a unit in a desirable location, like on the top floor or close to the pool.

Future renters Future tenants may also be permitted to view the unit at the conclusion of each development phase and notify the property developers of any faults, depending on the terms of the rental income pre-sale agreement.

A reliable source of income

If your goal is to make passive income from the property over time, a condo unit may offer a steady stream of money once construction on the actual rental property itself is finished. Renting out the property may be a way for prospective buyers to make money. If you select an apartment at the pre-selling stage in a prime position inside the building, prospective renters will be clamoring to rent it.

Updated facilities and premium amenities

Condos that are currently up for sale provide modern comforts and fittings, allowing purchasers to relax in style both inside and outside their new residence. In an effort to keep up with the times, a number of condo developers have started integrating smart home security systems into their projects.

Along with their outstanding positions, Asterra condos will also be outfitted with cutting-edge technology, notably in terms of building management.

Significant ROI growth upon turnover

Each year, the value of condominium units and the cost of residences that are being offered for presale increase. Pre-sale condo purchases allow you to lock in the lowest price while planning for future appreciation. Once construction is finished and a condo unit is ready for occupancy, it may be sold for a profit at the going rate.

This is another justification for why a property's location is so important to a buyer's or investor's ability to make money. Your first investment gain and best chance of your investment properties making quick and significant profits is to buy a pre-selling unit in or close to busy places like downtowns, college campuses, sizable shopping malls, and other commercial centers.

What are the tips for buying a pre-sale condo?

Manage your financing plans.

When purchasing pre-selling condominiums, one of the typical mistakes purchasers make is not having a solid finance strategy in place. By avoiding this, the shopping process can go smoothly. The loan approval gives you the confidence to submit an offer and demonstrates to real estate investors that you are a serious buyer with the resources to make a purchase.

Make sure you do everything up front if you intend to finance the initial cost of purchasing a particular investment.

It can take a while to obtain a home loan. You will need to gather all the necessary paperwork, research interest rates, make mortgage payments, and pick the most advantageous term plan. In contrast, the lending company will carefully review your credit score in order to approve or pre-approve the loan.

Check the payment terms.

Even if you have applied for financing or have been pre-approved to purchase a condo that is currently being sold, you should still review the payment conditions. Due to their cheap down payments, reduced maintenance costs, and low loan rates, purchasing pre-selling condos is very alluring. However, you could still need cash on hand for the reservation fees, taxes, and down payment.

If you decide to move forward with the transaction, make sure you are aware of the payment terms to avoid unpleasant surprises.

How do you calculate ROI?

To compute the return on investment (ROI) of a property, you need to consider both the costs associated with the property and the income generated from it. Here's a step-by-step guide on how to compute the property's ROI:

1. Determine the Total Investment: Calculate the total amount of money invested in the property. This includes the purchase price, closing costs, renovation expenses, and any other relevant costs incurred during the acquisition.

2. Estimate Annual Rental Income: Determine the actual price and expected annual rental income from the property. This can be based on market research, the rental history of similar properties in the area, or consultations with real estate agents or property managers.

3. Calculate Annual Expenses: Determine the annual expenses and associated costs associated with the property. These may include property taxes, insurance, maintenance costs, property management fees, utilities, and any other recurring expenses. Be sure to consider both fixed and variable costs.

4. Subtract Annual Expenses from Rental Income: Deduct the annual expenses from the net income of the estimated annual rental income to obtain the net operating income (NOI). The formula is: NOI = annual rental income minus annual expenses.

5. Calculate ROI: Divide the NOI by the total investment and multiply by 100 to get the investment's ROI as a percentage. The formula is: ROI = (NOI x Total Investment) x 100.

Here's an example to illustrate the calculation:

Total Investment: P200,000

Annual Rental Income: P25,000

Annual Expenses: P8,000

NOI: P25,000 - P8,000 = P17,000

ROI: (P17,000 / P200,000) x 100 = 8.5%

In this example, the average ROI for the property is 8.5%.

It's important to note that the ROI metric is just one measure of investment performance and should be considered alongside other factors such as property appreciation, cash flow, and potential tax benefits. Additionally, this calculation does not account for financing costs or potential fluctuations in property value.

For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and Youtube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.

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