Presale Units: What They Are and Considerations

Buying a property in the presale stage is a capital gains guarantee. This structure consists of entering into a contract with a developer to purchase a property before or during construction. For example, it can be purchased at the time of project planning when the development worksite is still empty or when the foundations of the development are first being laid.

According to Andrea Terán, an independent real estate agent endorsed by AMPI, presale condominiums can represent significant savings, and the shorter the stage of construction, the more accessible it can be.

“However, in this condominium acquisition structure you must be patient, as it is best for those that want to purchase a home, but do not have a need to immediately move in because projects, on average, can take a couple of years to complete”, she points out.

What Terán mentioned above is what makes this purchasing model worthwhile: “Whatever you paid for the unit in the presale stage will be much less than what it could cost when construction is finished, because over time the area around the development will improvement and will generate capital gain”.

Terán explained that if you want to buy a presale condo, it is very important to look at your budget and decide type of unit you can afford. “Here in Banderas Bay, there are beachfront developments being built, as well as developments in centrical neighborhoods. Which you should choose will depend on your lifestyle and investment objectives.”

“In the case of Puerto Vallarta and Riviera Nayarit, those who mainly buy presale are people who already have a property in their home country and want a condo to spend the winter months or for vacations, and then rent it out when they won’t be using it,” she adds.

The buying a presale can be achieved with one’s own resources or through a mortgage loan. However, it is important to ask the real estate agent about the payment structures, such as bank financing or direct financing from the developer. “One should keep in mind that the vast majority of mortgage loans offered by financial institutions will lend you up to 80 percent of the value of the property, which means that the rest is money that you will have to contribute on your own”.

CONSIDERATIONS BEFORE BUYING

There are several factors that should be considered before buying a condo in presale. Being that these properties have not yet started construction or are only in the first stage of construction, if proper precautions are not taken, purchasing early can lead to some risks for the buyers, like loss of time and money.

Terán points out the most common: “First, when you go to investigate the project, you have to ask for the building permits and check that everything is in order. Next, you should inquire about the reputation of the company that will develop the property. Also ask your real estate agent for comments about the development’s location, like is it an area that is developing, and what type of services it has or will have nearby, as well as the options for current or future mobility that you will have. This way, it will be possible to better visualize the capital gains that will be achieved in the short term.”

Some capricious practices can be encountered when purchasing presale homes. “One of them, perhaps the most common, is that at the time of delivery the unit received could differ from what was originally expected. Another is that the materials used for the construction of the development are not those initially agreed upon, and perhaps the most critical is that there could be delays or complete suspension of the construction.”

However, Terán ends with excellent news: “Here in our destination, the majority of recognized and reputable real estate agencies, as well as independent real estate agents that are endorsed by AMPI—Mexican Association of Real Estate Professionals—do all the due diligence work for the buyer, so when a condominium is listed on their websites or in advertising, it is very secure to purchase it in the presale phase.”