Risks and Rewards in Pre-Sale Buildings

Risks and rewards in pre-purchase building is a great way to get involved in a development before it’s built, and it offers many benefits for both home buyers and investors. But it also comes with its own set of risks and challenges.

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The first and most important risk is that you can’t get financing on a property until it’s built. This is because banks only lend based on the value of the property as it is today. If the property market drops below that, the bank won’t give you money – even if you still have your pre-approval.

Another common risk is that you may not be able to shift into your new home on the date you’d like to, because it may take longer than expected for construction to be completed. This is particularly a problem in hot real estate markets where bidding wars and limited supply can lead to long delays in getting a new home.

Thirdly, there is a risk that you may have to pay occupancy fees for living in the building while it’s under construction. These fees are a good way for developers to break even on living costs while their buildings are being built, but they can be expensive if you live there long enough to qualify for a mortgage.

Generally, buying a home as a presale is a smart investment for buyers who can afford to save up a larger down payment than they would on an existing property. It also gives them more time to save and apply for a mortgage, should they need it. In addition, it’s a great way to build equity if the market is rising during the construction period.