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WHOLESALE PURCHASE OF OFF-PLAN APARTMENTS

 

Wholesale purchase of off-plan apartments

 

Basic information about the investment.

1. Type of investment:

  • Wholesale purchase of off-plan apartments at 30-60% below their market price, with the aim of reselling the apartments at their actual market price.

2. Forms of investment:

The investment can be in the form of "Cuentas en Participación" or "Debt Investment", depending on the preferences and risk profile of the investor.

  • With "Cuentas en Participación", the investor provides capital to the company in exchange for 50 to 80% from the profit from the successful implementation of the project. This form of investment allows the investor to benefit from the profit generated by the project together with the entrepreneur.
  • In "Debt Investment", the investor provides a loan to the company and receives a fixed annual interest of 18 to 24% , which is agreed in advance. This form provides a stable and predictable return without being tied to the success of the project.

3. Minimum amount of investment:

  • The minimum amount of investment depends on the available investment opportunities at the time of investing the funds. Typically, minimum participation amounts start at €100,000 , with some projects also offering smaller investments through collective participation.

4. Minimum term of the investment:

  • 12 months with the option of exiting the investment through the so-called "substitute party". In this case, the contract is terminated, and the investor receives back the funds paid by him, including a proportional part of the profit or the agreed interest. This part is calculated based on the time during which the funds were used, relative to the total contract period.

5. Minimum guaranteed annual return on investment:

  • 18% guaranteed annual return on the invested amount with full return of capital at the end of the investment period.

How the investment is made: Step by step

1. Identification of pre-sale wholesale offers:

  • We operate similar to large investment funds and "Early Bird Investors" who buy properties wholesale in the earliest stages of design and construction from developers who offer apartments at 30-60% below market value to provide fresh capital. This usually happens before the apartments are officially offered for sale to end customers. This way we get access to the apartments at the lowest possible prices before the project is publicly announced on the market. This strategy allows us to buy the apartments at prices close to the construction cost, as developers need initial sales to meet the banks' requirements for granting credit.

2. Buying the flats in bulk with a discount:

  • We buy a large number of apartments off-plan (in the earliest stages of design and construction) at discounts of 30% to 60% below market value. For example, if the standard market price of an apartment is €100,000, we can buy it for €60,000 – saving 40%, giving us an initial profit on the purchase itself!

3. Payment for the apartments in installments:

  • In most cases, payment is made in tranches, with around 30% of the total amount paid initially and the rest paid in stages – usually every 3-4 months. This model allows us to manage funds efficiently by starting to sell the apartments at fair market value even before construction is complete.

4. Resale of the apartments:

  • Once the construction of the project starts, we can start reselling the purchased apartments. For example, if we bought an apartment for €60,000, the real market value of which in the earliest stages of design and construction was €100,000, we can sell it for that market value.

5. Opportunity to increase margin:

  • As the construction process progresses, apartment prices tend to increase. For example, if the initial market value of an apartment was €100,000 in the earliest stages of design and construction, when construction is completed, the market value may increase by 10 to 50%, depending on local market conditions, the quality of execution of the project and the input materials. Thus, the apartment can be sold at a price between €110,000 and €150,000, which provides an additional profit margin for the investors and the company.

6. Return of invested capital and profit distribution:

  • After the successful resale of the apartments, the investors get back the initial investment and their share of the realized profit, which is proportional to the size of their investment.

7. Repeat the process:

  • Once the process is completed, we identify the next projects at the off-plan stage and start a new investment cycle. Investors can reinvest their funds in new projects for even higher returns.

This investment method provides opportunities for very high returns that are difficult to achieve with other types of real estate investments, combining security and efficiency of capital investments.

Frequently Asked Questions (FAQ)

1. What does "wholesale off-plan flats" mean?

  • Bulk buying of off-plan apartments means investing in properties that are still under design or construction. Investors buy apartments at very early stages of the construction process, usually at a deep discount to their future market value.

2. Why do property developers offer big discounts on bulk purchases of off-plan apartments? 

  • Property developers offer big discounts on bulk purchases of off-plan apartments because they need fresh capital to start construction activities. Wholesaling apartments allows them to obtain the necessary financing, in return offering significant discounts to early investors.
  • Property developers also offer big discounts on bulk purchases of off-plan flats because they need pre-sales to meet bank lending requirements.

3. Why do banks require a certain percentage of pre-sales from property developers in order to provide them with financing?

  • The biggest risk in financing the construction of new apartments and house complexes is the lack of sales. If the properties are not sold, the property developer will not be able to repay the loan. This is why large lenders often structure loans for the construction of apartments and townhouses in such a way that the funds are not released until the project achieves a certain number of pre-sales (apartments under contract to sell after completion) or pre-leases (if the property strategy developer is Build & Hold).

4. What are the main risks with this type of investment?

  • Key risks include construction delays or changes in the market environment that could reduce expected earnings. However, by buying properties at a 30-60% discount from the price in the earliest stages of design and construction, we minimize the risk of capital loss because if there is a possible market downturn, the real value of the property remains higher than the price at which we purchased it. Even when property prices crash, we can sell the asset at close to the purchase price to recoup the investment before the market deteriorates significantly.

5. How is the security of my investment guaranteed?

  • The security of your investment is based on the fact that the properties are purchased well below their market value, which creates a "safeguard" against possible market fluctuations. In addition, we perform a detailed analysis of each construction investment project to ensure that the profit potential is there.

6. What does return on investment depend on?

  • The return depends primarily on the form of the investment. Investors who choose to invest in the form of "Cuentas en Participación" can expect a percentage of the profit on a successful investment. For those who choose Debt Investment, the annual return is fixed and is based on a pre-agreed interest rate on the capital borrowed.
  • The return also depends on the size of the investment. Smaller investments offer a lower rate of return and lower interest, while larger amounts increase the rate of profit and interest. The larger the amount invested, the higher the return will be.
  • In addition, the return is also tied to the term of the investment. The longer the investor leaves his funds in the project, the higher the interest and profit he will be able to realize.

7. What happens if you fail to sell the properties?

  • In rare cases, if we are unable to sell the properties at the expected price, we will continue to work to find suitable buyers. If this drags on, we can offer various options for exiting the investment, including selling at a lower price or renting out the properties until market conditions improve.

8. Can I exit the investment before the end of the project?

  • Investments in this type of project are usually fixed-term. However, in some cases we may offer to buy out your share if there is such demand from other investors or partners. The conditions for this are discussed individually on a case-by-case basis.

9. Which form of investment is for you?

  • If you are an investor who is willing to take on higher risk in exchange for the possibility of greater profit, Cuentas en Participación is right for you.
  • If you are an investor who prefers minimal risk with predictable and stable returns, Debt Investment is the best solution for you.
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