A project built with new buyers’ money: where a normal financing model turns into a risk

Presales are a normal financing tool. They become a risk when construction effectively cannot move forward without new sales. In a presentation, this is easy to condense into a single line, but for an investor, several different risks lie behind that line. In a project, I am interested not only in the buyer’s payment plan, but also in the relationship between work already completed, developer equity contributed, and future payments.

What I check first

I check what has already been financed before the next phase goes on sale. For an investor, this changes the very framing of the question: instead of “like it / don’t like it,” there is a parameter that can be verified before the deal. In a project, I am interested not only in the buyer’s payment plan, but also in the relationship between work already completed, developer equity contributed, and future payments.

Where the presentation often oversimplifies reality

I compare construction progress with the percentage of money already collected from buyers. I would take this point out of the presentation and put it on a separate line in the model. If it is not supported by documents, factual data, or clear logic, it cannot be quietly left in the base case.

What this does to the financial model

I look at whether there is committed financing or a liquidity buffer. This is often where the gap between expected and actual results originates. Presales are a normal financing tool. They become a risk when construction effectively cannot move forward without new sales. That is why I want to see not just a single figure, but a cause-and-effect relationship.

Which scenario I would test separately

I read what happens in the event of a delay or default. In practical terms, this means something simple: I adjust this parameter in an unfavorable direction and see what happens to cash flow, the payback period, or liquidity. If the entire investment rests on one ideal assumption, that is a separate risk in itself.

What the next buyer will see

An early discount should compensate for execution risk, not simply create a sense of getting a good deal. At entry, this receives less attention than returns, but at exit, this very factor may determine how long the sale takes and what discount the next buyer asks for.

Conclusion

For me, there is no universal answer on this subject. There is a specific deal, specific documentation, and a specific investor’s time horizon. Presales are a normal financing tool. They become a risk when construction effectively cannot move forward without new sales. If this can be explained in plain language and demonstrated with numbers, then it makes sense to discuss expected returns.

About the author

Vladyslava Kravchenko is the co-founder and managing partner of NESTRA REAL ESTATE GROUP and the founder of Nestra Insights. She works with international investment real estate, analyzing rental economics, development risks, capitalization, and exit strategies.