The rapid urbanization has led to an increase in demand for housing options in order to meet the demand for housing needs. And as the land area becomes restricted, more and more structures are being built in stacks of spaces such as what you see in condominiums.
What is a condominium?
If you see a building that has been divided and even more subdivided into multiple housing units, then you are looking at a condominium complex. Each unit within the building is being sold off individually to select investors who will have a share of land ownership upon which the entire structure was erected.
Did you know that buying pre-constructed condos has more advantages?
If you are planning to invest in condominiums for business purposes now that mortgage rates (as seen on a site like Credible.com) are so low, then you will be happy to know that condo sales have exponentially grown in recent years, particularly pre-constructed condos. Given the fact that even a common townhouse can cost millions of dollars and are often located far from urban areas, many people have opted for more affordable and convenient alternatives, which is investing in a condo project instead. But did you know that nowadays, several investors have shifted their gears towards the purchase of condos in their pre-construction state? Why? Find out here.
1. Invest less money initially
Perhaps you are looking for other opportunities to grow your money, determined to start a long-term quest to financial freedom and happen to turn your attention to real estate business, particularly a condominium because you noticed everyone is aiming their arrow to it. There must be money in there, right? But not all people have the same extra money to spend in this venture. Fortunately, for pre-constructed condominiums, you will have an opportunity to invest less money initially with the goals of getting more value for it in the future. This is all about maximizing your return on investment, wanting as much as possible to venture in it like others and get the most bang for your buck.
It is a fact that fully finished condos are more pricey compared to those in their pre-construction state. One reason would be that the owner of the entire complex is still searching for possible investors and in order for the latter to get the bait, the units are sold at such a relatively lower price than the current price of a condo once it has already been fully built. And once the pre-constructed condo is finalized, you will be able to reap the benefits of your investment in no time. Although, it cannot be prevented that there may be some risks involved in investing in such a project, more often than not, the benefits of doing so mitigate any risks involved.
2. Gain instant equity
Another benefit you can get out of investing in a pre-construction condo is having the opportunity to enjoy equity. As soon as you invest in at least one unit and once you already have the pertinent documents to commence the procurement, instant equity is guaranteed as the condo is good as yours even before the construction takes place.
3. Leverage limited funds
By putting your money in pre-construction compared to other investment opportunities, you will be able to make more with less. That is what you call leverage. It refers to the borrowed capital you use to pay a condo unit. Let us face it, not everyone will have the luxury of money for investment, but there are still people who choose to borrow money from the bank after determining positive financial projections from such ventures.
When you leverage limited funds for better returns by investing prior to construction, you will be able to yield percentage gains on a higher amount than what you have actually invested thereby making you earn more money in the long run. There is no problem if you will not have all of the money available for the purchase. You can just go and get a mortgage from the bank.
Usually, you will pay 20% as a downpayment and the bank will pay for the remaining percentage. In exchange for having the bank finance your growing equity, you will pay the bank back over the course of 25 years, more or less, depending on how you had your mortgage structured. What is good in pre-constructed condos is that you will be able to pay your down payment in stages instead of having it all at once. With this kind of flexibility over your finances, condo-investing allows one to earn high ROI.
4. Real estate appreciation
One obvious savings you get out of buying a pre-constructed condo comes from buying it when it is not yet built. But another benefit of this undertaking that is often missed out is real estate appreciation. This is due to a common misconception that the investor will not be able to see a return right away.
Take stocks and mutual funds as an example. Investing in them will only yield a return corresponding to the actual money you put down. However, in pre-constructed condominiums, one will be able to generate a return on the entire value of such purchase, despite the fact that only the initial portion is paid up front.
Buying these structures before the floor plans have been transformed into a real building allows investors to get the highest capital appreciation and price growth directly after closing the deal. All developers search for locations of their buildings that are strategic in the sense that jobs will be created and people will be coming to live in them. As a result, you are like investing in an up-and-coming neighborhood which makes the demand for housing increase substantially.
5. Paid back with Future Rental Prices
In this type of business venture, it is fair enough to say that you are actually buying a condominium unit such that you will invest your money now in something that could be very valuable in the future. In return, it will be paid back with rental prices once the structure is ready for lease.
Over the years, rental fees for homes continue to increase as many would like to live in the city but there are only limited spaces to construct buildings for such purpose. If you check in CondoWizard, you’ll find how strategically placed the condo building are, either in a well-developed part of the city or an area that’s on its way there. The condominium complex has somehow addressed such an issue of space, and those who have the money to invest in it can make money out of it because they become one of the few who can control the low supply for such high demand. years from now. This further increases the positive cash flow. With pre-construction condos, an investor pays the current market value. When they come in completion, the investor can have the units rented based on the market price five to ten years from now. This further increases the positive cash flow.
Be ready for a real estate business
The most successful real estate investors know what, when, where, and how to take advantage of opportunities as the competition in this industry rolls up. Buying a pre-constructed condominium is like building your dream house, only that you are earning from it even if it has not yet come to reality. Even if you change your mind by the time the project is finished and just use the condo for home living instead of leasing, you could just imagine how much money you have saved from the previous years as compared to just buying one finished product now.
So, are you ready to make the best investment of your life?