Pre-sale Property or Off Plan Property – Learn before investing in Real Estate
Pre Sale or Off Plan - Definition
Developer that selling a commercial or residential property pre-construction or completion.
The Buyer that purchasing the pre-sales is buying the right to a completed property that will be built in future.
The pre-sale usually will be the first phase of the development sales effort and mainly amid to investors and speculators that hope to make a substantial capital gain.
There is a high demand for these projects by foreign investors, particularly in popular markets such as Bangkok, Phuket, Koh Samui, Chiang Mai and Pattaya.
Pre-sale and Off Plan Property sales are also benefit buyers as they can choose the best unit in the project.
In some cases the financial part on off plan and pre-sale property can also be interesting for buyers as
the payment structure is usually very low and flexible.
Many developers are lunching their projects as an off plan or pre sale, and offering special promotion for a short period.
Developers are really depending on the Pre sale promotion results, so they will be able to fund the project construction and development.
Some developers never pass this critical phase of minimum sales point and they are unable to complete the project.
There are many risks of buying an off plan / pre sale project:
- The developer is unable to complete the project
- The Property Value may goes down
- Construction company may not be able to complete or bankrupt
- The finished property may not meet the buyer's expectations
- Delay of completion date
- Developer bankrupt / default
Process of Buying an off plan or pre sale property:
Step 1 - Choosing a unit in the project
Step 2 - Making a Booking Deposit, This step will secure the unit under the buyer name for a short period
Step 3 - Signing the Property Purchase Agreement and pay the agreement fee
Step 4 - Transfer the initial Deposit (that can be very from 10% up to 50%)
Step 5 – Installment schedule, Some developers are very creative with their installment payment structure
Step 6 – Final Payment, typically when the buyer sign to receive the property and the property will be registered on the buyer name
Note: Every Developer has their own rules and conditions regarding their payment structure.
How to decide which property off plan or pre-sale should you buy?
As there are many risks and benefits when buying an off plan or presale properties, I give you some idea that will help you to look into before making your final decision to purchase
- Check the reputation of developer
- Check the Sales track record of other project of the same Developer
- If the Developer have delayed project and what is the current progress of those projects
- Always use a Real Estate Agent
- Consult with a Lawyer about the Terms and Conditions of the sale agreement
- Make sure that you will be able to complete the financial payment
- Check your rights, in case the Developer will be delay on completion
- The law in Thailand regarding the transfer fee of new development is up to 50%/50% with the buyer means that the developer can only charge you with transfer fee up to 1 % of the property value
- Only sign an agreement that will specify a refund clause and in which case
- What are the terms and conditions in case of a delay and what are the refund policy in case of over delay (there is a limit on how much the project can be delayed)
- Make sure the floor plan and design is attached and part to the agreement
- Ask for assignment clause to allows you to transfer the obligations of the agreement to a third party and what will be the fee for that if any
- In case of Dispute The agreement should have an arbitration clause so settle any disputes as Arbitration is generally less costly
We strongly recommend that you will consult with a real estate lawyer before signing any agreement.
Many Investors are buying Pre-Sale or Off Plan Properties in Thailand in order to rent those properties on yearly basis, by collecting rental fees.
Investors can make a high margin Yield on their investment due to the low price purchase during the off plan promotion.
Investors need to check the common rental fees in that area before buying the property, as some developers are presenting falls numbers of Yield when the actual effective yield is much lower.
Off-plan and Pre-Sale Conclusion
This type of property investment is probably the best way to maximize the full Property Investment (ROI) potential.
When buying an off plan/pre sale property in low price, the investor can generate a higher Yield that will get fast ROI (Return on Investment).
Buying a Pre-Sale and Off-Plan properties comes with a risk that some investors are not ready to take and may lose their money.
As long as you will do a proper due diligent and buy the property from a trusted developer your purchase should be safe.
learn before you invest in Thailand