Buying Phases For Under Construction Properties
There have been many strategies required in the lead up to property buying from the understanding of one’s financial position to learning how to leverage wisely from banks and the researches on factors that could contribute to a high ROI (Return On Investment) including post purchasing action such as renovation and managing tenants.
Despite learning about every possible step involved to acquire the first, second or maybe more properties to add on to one’s portfolio, there are always many options for us to consider. Every opportunity that comes along requires careful consideration although the process can become familiar and smoother as one repeatedly invests in a similar segment of the property market.
Timing has always been a crucial viewpoint. As much as we want to predict the best timing to enter the market, no one really has a crystal ball to peer into the future.
Therefore, thorough preparation is crucial in any property investment decision. For those who are prepared – when presented with an opportunity, swift action could likely bring along a profitable venture. This is very apparent in “Pre-Launch” properties whereby below market deals are often seen as developers throw freebies to “lockdown” the buyers’ interest.
When considering a new project that has yet to be developed (also frequently known as “undercon” properties), there could be many phases that a developer may plan to release their launches.
Whether they are residential or commercial properties, a developer usually splits the launches due to many reasons such as to excite the market with lower priced launches first as well as to fulfil needs in a township for i.e. commercial shoplots providing staggered launches with the necessity that forms part of an investor’s consideration.
Phase 1 launches by property developers are usually priced lower than those to be launched later in terms of both absolute amount and the price per square feet (psf).
As subsequent phases cannot be lower than the initial launch for obvious reasons, many would want to rush into securing a unit for investment since ROI is all about entering the market at a low price. Usual units that are easily grabbed by early investors and buyers are those that are in the lower floors since every floor increase would attract additional premium – not to mention different views.
While securing at below market value could be the underlying reasons for good ROI, one may need to rethink about the potential upside of the property too. If the properties can appreciate in value over the short to medium term, then it makes logical sense to buy into them even at later stages although one may have missed the inaugural phase. There is more good than harm in putting our monies into a potentially good property which can give a strong yield albeit at a later stage than investing early in a non-performing property.
COMMERCIAL PERSPECTIVE (SHOPLOTS)
However, the same could not be applied when it comes to commercial properties such as shoplots in a township. Buying the earliest phase of a shoplot launch may pose a higher risk to the investor as there may not be anyone who would want to rent the shop to run a business especially if the neighbouring vicinity has yet to have any residents move into the area.
Not only does the shoplot investor have to prepare for a longer holding period aka deeper pockets to absorb the monthly instalments to the bank – they are also susceptible to competition from other shoplots having the same urgency to rent out their units in the fastest time possible.
Imagine – if one were to wait for a little longer and invest in the later phases of a commercial property, the whole dynamics of the investment game could be very much different. Yes, one may encounter a higher psf price than the earlier launched phases, but an investor who has been diligently monitoring the area or township could place the position back in his or her favour as the existing business environment of the earlier launches would have been proven.
Perhaps a more mature neighbourhood of residents would translate into more stable economic activities – ensuring a less risky form of rental return to the next potential shoplot investor. It is therefore imperative, from these viewpoints above, that an astute property investor might want to consider the ‘entering phases’ of property buying and not succumb to attractive offers usually provided for the earlier phase of a property development.
As much as the calculated ROI figure temptation is there, property investment must also be practical to the investor. In conclusion, nothing worth investing ever comes easy. Be a smart property investor is important but being a matured property investor does take time.
Stay vigilant and stay hungry, Happy Property Researching!
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