2023-07-17 17:50:00
Buying pit properties gained popularity in the 15 years prior to the Covid-19 pandemic as an attractive option for those looking to invest in real estate. It involves acquiring a property before its construction is complete, which offers a number of benefits for buyers and developers.
“One of the main advantages of buying a property under construction is the possibility of obtaining a lower price compared to finished properties. Developers often offer discounts and preferential prices during the pre-sale stage to attract buyers. That means investors can buy a property at a lower value, and as construction progresses, its value is likely to rise. This can result in a significant return on investment in the long term”, highlights Luciano Lutri, head of the Luciano Lutri Real Estate firm.
In addition to the lowest prices at which a property under construction can be acquired, it also provides the opportunity to customize it according to the individual and particular preferences of the investor. Buyers often have the ability to choose from different designs, finishes, and materials, making it easy to create a space that suits their needs, tastes, and preferences.
“This possibility of customization adds value to the property and may be of greater interest in the market once finished”, added Lutri.
It is key to take into account the potential for progress and growth in the area and microzone where the property or building under construction is located. They are often in developing areas with expanding infrastructure and positive economic growth.
It is key to take into account the potential for progress and growth in the area and microzone where the property or building under construction is located.
“When investing in a property located in an up-and-coming area, buyers can benefit from the appreciation of their investment as the area develops and becomes more attractive to live or work in. In turn, that can generate considerable profits in the long term”, underlines the referent.
Is there a “but”? According to Lutri, today the well purchase segment is in decline, since there is no major difference between the value of a well unit versus the completed one. “Before, there was total certainty in the value at which it was acquired and the value at which it could be sold, while now there is uncertainty for both the investor or buyer and the developer; it is unknown in which values it will be able to sell, as a consequence of the honesty in the prices (adjusting the nominal value in dollars). Added to this is electoral uncertainty, ”he underlines.
Tips to keep in mind
Gabriel Silvester Holland, head of Holland Real Estate Management, highlights the keys to consider for those interested in this type of investment.
1. Investigate the developer, to avoid future risks. “It is the most important thing that any small or large investor has to do. See solvency, financial planning, sales projections, commercial feasibility, that is, demand areas and projected sales, seriousness in delivery and compliance with agreed deadlines. All of this contributes to the prestige of the company behind the developer. These points can be found out with the real estate agency and in legal-accounting studies, by the name of the marketer, the CUIT, and googling to see what is being said in the media, to be more certain”.
2. Location, for three. The most important thing to keep in mind; if there is a demand for the final purchasing public, depending on the destination of the unit and the investment.
3. Typology and meters of the department. “Depending on the destination of the investment, whether it is for monthly rent, temporary, to personalize gray works and resell with a higher profit, or to live and seek revaluation over time. The investment thought function is important; from there the square meters will be seen (one or two bedrooms, floor).
4. Unit prices. “Depending on the location, medium, medium high or high quality. Finishing, quality, sizes, everything depends on the neighborhood in which it is built and the price. An urban corridor with commercial life is more expensive than an internal street, and a corner is more expensive than the location in the middle. If it has squares or green parks, it is worth more”. Another important issue: expenses and amenities, which sometimes add up and other times subtract from the investment.
5. Delivery time and risk-reward. “For a 12-story building, delivery ranges from one and a half to two years; if you enter as soon as the well starts (that is, the first trust ticket to the client) there is more risk, but also more profit. You can go out a year, when the building is advanced. When the work starts, there are more doubts as to whether it will be finished, due to the cash flow that construction requires”.
6. Knowing how to enter, knowing how to exit. “Whoever invests in a trust or well runs the risk that it will not be sold or that it will be delayed due to lack of demand or changes in economic cycles. It is key to review who builds and manages or executes the trust, that is, the seriousness of the company. Know what type of investor I am; go from less to more, informing me and asking. Do your homework: if an investor enters the cost, he has a greater risk but at the same time a greater profit, and he acts on a par with the other investors and with the developers. Those risks are known. It depends on the moment and stage in which the investor enters the trust: it is not the same to enter the first stage than in the following ones”, concludes the expert.
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