Alright, this is the question that has been appearing for some time, so I will attempt to address it. Spoiler alert: There is no right or wrong answer!
That’s right. It depends on your intention more than anything else! Case in point: I have some awesome cars, as you all know, but when I go to the market I will just hop into a Myvi.
Why? Because a Myvi serves its purpose better than driving an expensive car to the market and stain it with the groceries I bought from the market.
So let’s jump into the characteristics of sub-sales and project-based properties, before dwelling further into which should you use for what intention:-
- The Unit Itself
Buying a sub sales property means that you are buying the property from someone else instead of directly with the developer. It means that the unit is properly already in the market for some time and is older.
While it is true that what you see is what you get, what you are seeing is usually not very favourable (think: wear and tear due to older property). You will usually need to come out with extra cost to renovate and replace/repair the furniture in the property.
On the other hand, buying a new unit directly from a new project built by the developer means that your unit will come with a 2 years warranty for any defects such as bathroom leakage, cracks in the wall or door and window hinges that are not properly installed – thou with that being said, it will usually take a while for them to act on the defect.
Buying a sub sales property means that your property is probably not up to date in trend (think: new condominium these days have better interior design, better facilities, two parking spaces which might not be available in older apartments). However, the benefit is that once you have purchased it, you can move in immediately.
When it comes to project, you are not sure when you can move in or if there will be any risk to the project development. Sure, everything might look good on paper, but we wouldn’t know if the developer might delay the project or worse – abandon it altogether.
By virtue that sub-sales means the property is there already, it means that upon purchase, you can get tenants to move in the soonest possible. Besides that, you can know how much the rental value in that area is – and if negative gearing is needed, you can project how much more you will need to pay per month. This is indeed a plus point if you are buying this property for rental purpose as you will have immediate cash flow.
On the other hand, as mentioned, there is this risk of delay with properties that are still under construction. With that being said, once the property is finished, usually the value will go up. So if you are buying this property to flip it – then this will be a plus point.
This is the aspect in which many buyers neglect – but this is indeed a crucial part. Buying a sub-sales property means that you will incur more cumbersome paperwork. When compared to buying a project based property, the developer will usually cover the cost of paperwork and make the entire process as easy as possible to you.
Think of the time and effort saved. If you are a working class, this is one of the things which you must consider as you will have difficulties taking time off work.
5. After sales and looking for information
If you are buying a developer unit, you can generally expect a certain level of after-sales service should there be any problems. It is also easier to look for information on the unit that you are purchasing as it will be supplemented by the developer too.
If you are buying sub-sales? Don’t expect the previous owner to come back and rectify any error, especially if they have received full payment from you. It is up to you yourself with no support to rectify any error.
Question: So what is your investment strategy?
If you are buying the property to rent it out – I would suggest sub-sales instead. Why? Because predictability of rent and you can know how much money you need to fork out for negative gearing. You will also know how much is the rental for other units in the same area.
If you are buying to flip? Buy a new unit from the developer. Once the unit is ready and the price increase, you can flip it. While it comes with its own set of risks, that’s why due diligence is required.
“But Adrian, if I buy for own stay how ah?”
Idiot! I have said many times stay at places of convenient. If you are working near that place, stay near it even if you must rent – otherwise, why buy an expensive house if you are going to just sleep 8 hours in it then go to a faraway place to work the next day and basically have no quality of life!