Pros And Cons Of Buying A Sub-Sale Property
by
Jia Shin Lee
- June 29, 2018
Property hunting is truly a daunting experience. There are so many options to choose from, ranging from brand new properties that are still under construction to existing properties on the sub-sale market.
Before you make your choice on what property to purchase, it’s a good idea to do in-depth homework and research to make sure that you make an informed decision that you will not regret.
Read on for the pros and cons of buying a property on the sub-sale market. Also, do check out https://www.propertyguru.com.my/resources/buy-property-guide/the-complete-guide-to-purchasing-a-property-in-the-subsale-market for an in-depth guide to purchasing a sub-sale property in Malaysia.
First, some general information
Sub-sale properties are properties that are available for sale on the open market. Usually, the property is purchased from the previous owner. You can obtain all information on the property by visiting and requesting information from the relevant land office. When you invest in a sub-sale property, you know what you are getting in return for the money you are paying.
Pros
1. What you see is what you get
A sub-sale property is one that is tangible: what you see is what you get. Compared to a new launch property, which you can only imagine what the final product would look like, sub-sale properties allow you to get a real feel of the property you are purchasing before you spend your hard-earned money. In other words, there is a certainty in the final product that you obtain. The quality of the property that you purchase is immediately perceptible.
This also extends to the environment of the property. For example, the area around a sub-sale property is usually substantially developed, and there is less uncertainty regarding possible developments such as highways and public amenities.
2. Financial freedom
When you invest in a sub-sale property, you can immediately reap the fruits of your labor. Once you have the keys and deed in hand, you will be able to generate immediate cash flow. If you plan on turning it into a cash cow, you can immediately rent out the property and collect rental, which will, in turn, pay for your mortgage without you needing to fork out your own cash for mortgage repayments. If you are in luck, there might also be existing tenants on the property, which saves you from the burden of marketing your property on the rental market. This saves you in real estate agent fees as well.
Furthermore, with a sub-sale property, you don’t have to wait for completion time. This means that your credit will not be tied and locked down with the bank, allowing you to have the option to refinance and acquire other properties fairly quickly.
3. No risk of delays
The thing about buying a sub-sale property is that it already completed and exists. The property can immediately be put to use, either to live in or to rent, once all the legal and financial paperwork is completed. There is decreased risk in relation to delays, as you won’t have to deal with delays that inevitably pop up due to missed construction deadlines and missing developers with abandoned projects.
4. Ready market
With a sub-sale property, you are buying into a developed area, where information on market rates and valuation is readily available. You can look into rental rates for the area and you are able to easily do calculations according to the market demand of the area. You can’t do this for an under-construction property, as there is no market data available.
Cons
1. Fewer potential properties
The problem with buying something used is that you will have to spend more time and do more work to get a good deal. You will need to devote more time to view a range of individual units and properties, which can be in various states and conditions. You will also need to check the condition of each unit carefully, as well as look at market valuations and prices of comparatives in the area.
2. Seller Hazards
Unlike buying a newly developed property, where prices are usually fixed, you will have to deal with sellers when you buy a property on the sub-sale market. Although there is room for negotiation on the price, some sellers may increase prices based on how much interest the property is getting. You will also need to compete with other buyers, which in turn will drive the price and valuation of the property up. You might end up forking out more money compared to the actual valuation of the property in question.
3. Buyer Hazards
Cheaper doesn’t necessarily mean better. When you’re buying a sub-sale property, you will need to be more careful. For example, if a seller is eager to get rid of a property and is willing to slash the purchase price to facilitate an easier sale, then you need to be more cautious and keep your eyes out for red flags. You will also possibly need to deal with real estate agents, who can be unscrupulous at times.
4. Existing problems
When you buy a newly developed property, it usually comes with a warranty from the developer. This means that you can get any defects fixed without any additional cost. However, properties on the sub-sale market may require updates and repairs, which you will need to bear the cost of.
