Buying off-plan or ready to move-in property in Phuket
It seems obvious that the buying of apartments off-plan is more profitable than the buying of completed apartments. But let’s look at the pros, cons and risks of options for investing in Phuket real estate and determine the benefits in figures.
Benefits of investing at off-plan stage
80% of the apartments in the projects by Phuket9 are bought during the construction phase. About 10-20% of the apartments are sold before the construction of the condominium. However, most investors are waiting for the receipt of permits. The main reason for investing in the early stages are prices. The cost of apartments in condominiums in the process of construction usually grow by an average of 10-15%. In addition, at the beginning of construction, the choice for buying apartments is much greater.
Risks of buying an apartments during the construction phase
Despite the fact that significant “unfinished” in Phuket has not happened, this risk potentially exists. For today, the main risk remains the protracted process of obtaining a construction license. The receipt of permits for some projects may take more than 2 years. And although the investor pays only a part when reserving an apartment, this fee, at a rate of 20-40% for this period will in fact be frozen – will not bring profit, as expected.
Buying of completed apartments
- Minimum risk
- Ability to evaluate the object live
- The opportunity to immediately use the apartment
- Rent income immediately after registration
The non-obvious plus of the cost, which is higher for the completed object is the receipt of a correspondingly higher income from the guaranteed income program.
Explanation: the income from the developer is calculated as a percentage of the cost of the apartment. Of course, in the case of a sale, the difference between the initial cost and the final one will be important.
The difference in the yield of completed and off-plan apartments
However, let’s count. How much the difference in income at buying of completed and off-plan real estate object is great. This is a simplified formula for example, to clarify a few more not obvious benefits from the investment.
Introductory data – for example, consider two similar objects at a price and cost at the end of the rental program.
1 – Investment in the construction phase: 4,000,000 THB
2 – Investment in the finished apartment: 4,800,000 THB (20% higher)
Terms of the rental program: 7% per annum for 8 years. Term from the beginning of construction to commissioning: 2 years. Sale of the property after the expiration of the rental program: 6,000,000 THB
The difference in the return on investment in completed and newly built housing was 0.475% per year. Or 3.8% for 8 years. From the completed apartments is more “instant profitability”. In the long term and in the case of a sale, buying at the stage of construction brings more.
CONCLUSION. Buying a completed apartment is 20% more expensive, the investment loss is only 3.8%. Perhaps in some cases this loss can be compensated by the absence of risks in the property under construction, as well as the possibility of obtaining an object for use and rental income in the shortest possible time.
Special income programm The company Phuket9 can offer two options for investing in completed and off-plan property, as well as a special income program. At the second stage of the current construction of the VIP KATA condominium, it is possible to receive a return on investment from the first day after full payment of the apartment. That is, the investor receives income already during the construction of the facility, paying the entire amount immediately. For the developer it is an opportunity to direct additional finance to accelerate sales and construction, for the investor (buyer) – to get more favorable terms and return on investment from the first days.
It should be noted that the VIP KATA project has already received permits, construction began in August, 2018, and the Grand Kata VIP Hotel is already operating in the first phase of the condominium.
There is an opportunity to choose standard conditions for the buying of apartments with payment for the construction phases within 2 years (completion of the project in mid-2020). Either buying completed apartments in the first stage of construction, which, in addition to the profitability from the first days, are ready for living or recreation.