To build for sale or for rent?

When you are developing a commercial project, it’s always good to choose the most optimal model that assures you the highest returns as well as give you peace of mind. And so in the array of options, you can either out rightly sell off your units or lease them out for rent, or have a mix of the two.

The question is, which of these is the better option? My opinion is that your choice will depend on a number of factors, some of which will include your objective for the construction project and matters to do with the construction finance. Your construction project objective may either be to make a profit now or in the near future or just to build a critical mass of wealth.

If you want to make the most returns and as quickly as possible, I advise you sell off your units at the most convenient time possible. Of course if the market is not favourable you may want to hold on the property for speculative reasons.

If on the other hand, your purpose of the development is to own all these property across town you, will most likely lease out your property. But then you will have to cater for the management of the property and maintain it throughout its lifetime.

This is important for the developer who thinks of investing for his future generations Managing the construction financing costs is also important in the decision you make. You will probably agree with me, that few people can afford to do these developments from savings, so usually a bank is involved and the charges are quite high.

If you decide to sell the property after construction, you will obviously be in a better position to make your gains and clear all your financial obligations. Letting on the other hand spreads out the realisable income for quite a while. You may, therefore, be unable to clear your loan in the shortest time possible and consequently end up paying up a lot as interest.

Of course nothing stops you from keeping some of the units and selling some immediately. That’s why in my conclusion, I can only urge you to have clear objectives and prioritise your obligations.

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