5 advantage of buying on pre construction

WHY BUY PRE-CONSTRUCTION?

5 ADVANTAGE OF BUYING ON PRECONSTRUCTION / LOS CABOS. Prepared by Arturo Veneagas

LOS CABOS REAL ESTATE MARKET

As Los Cabos condo prices continue to soar in value (currently 12% to 15% year over year), we are constantly asked, “should I buy preconstruction or resale“? What are the advantages of buying one versus the other?

There are many advantages to buying pre-construction. However, of these, here are the top five reasons you’ll want to consider making the investment.

1. - An Extended Deposit Structure: When purchasing a new build condo, the down payment (between 15%- 35%) are typically spread out. This can extend over 3 months. Specifically, not having to put down 35% upfront allows investors and end users to save up. Or, in some cases, utilize a line of credit to even further spread out the payment deposits.

An Extended Deposit Structure:

During the 1- to 2-year time it takes for a build, other than paying the deposit structure, there is no mortgage obligation until closing. In fact, the mortgage kicks in only on closing. This means you own a pre-construction property but it will not show up on your credit bureau. And this allows you the flexibility of owning a residence without affecting your debt ratio or your ability to access debt from a lender during this period.

2. - Gentrifying is Your Best Bet Buying pre-construction is like buying futures in the stock market. Essentially, you are buying at today’s prices with the belief that in the future, prices will rise. Historically, long-term prices of residential homes have always gone up.

Gentrifying is Your Best Bet

For this reason, you can improve your odds of appreciation by acquiring properties in highly gentrifying neighborhoods. This is where major infrastructure or transit is scheduled to be built.

3. Hands Off While investing/owning is exciting and lucrative, owning real estate in Los Cabos area can also be a very hands on experience. For this reason, many potential buyers and investors turn away from this opportunity.

One of the greatest advantages to buying preconstruction is the first 2- to 3 years, during which the construction period is entirely passive. Once the building is complete, an investor can retain a qualified realtor to rent out their property and start to get an extra income every month.

4. A More Civilized Process Oftentimes, when purchasing resale, the most desirable condos sell in heated bidding wars. This is usually fraught with last minute decisions that are sometimes entirely based on emotion.

However, when buying preconstruction, you have what’s known as the 28day cooling off period. During this time, you canreview the purchase information with your lawyer, lender, realtor, and financial advisor.

5. New is Better When it comes to the resale condo market, renters and buyers get distracted by the new and shiny, and because of this, there is a willingness to pay a premium.

However, with time, buildings become dated, maintenance fees start to rise and the Warranty program expires.

New is Better At this point, the trajectory of a condo building’s appreciation begins to slow relative to the rest of the market. If you were to buy a condo today, in four years it ages and with this, gets closer to the end of its prime.

Whereas if you purchase a new condo, in four years, you’ll have a brand new property. And, it’ll be in demand while hopefully having appreciated with or above the market during the construction period.

More and more investors and home buyers are turning towards pre-construction as a safe, passive and lucrative way to acquire property. Because not all opportunities are equal, it’s important to know your developer – some are far better than others! When looking to make a significant investment like buying pre-construction real estate in Los Cabos, you should have an expert realtor by your side.

CONTACT: arturov@discovering-mexico.com 011+52 1 (624)113-8613

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