Tapping into the Goldmine of Pre-Construction Properties

In a nutshell, pre-construction real estate investing is the term used for purchasing a condominium unit, townhouse or single family residence before it is completely built. Many of these investments begin even when there is nothing more than an artist’s conception of the property.

Pre-construction real estate investing is one of the segments of the real estate market that fuels the entire market. Because of the US dollar’s weakness against other foreign currencies, foreign investors are able to purchase US land and develop the property as an investment.

Another reason it is so hot is the stock market’s volatility, which forces the average stock market investor to have a hands-on investment strategy. Since many investors do not have time for hands-on investing, they turn to investments that do not require their daily monitoring – such as pre-construction properties.

These factors have helped push pre-construction property investments to unprecedented highs, which has made many part time and full time investors very wealthy.

However, it is not that simple to enter into the pre-construction real estate market because there are not many opportunities. When opportunities do arise, they are often sold out in a matter of days if not hours! The market is such that investors aggressively go after available pre-construction opportunities that property developers do not have to resort to expensive advertising and marketing programs to sell their property.

The math is simple, by investing early at the pre-construction stage, investors stand to profit from the appreciation on the property without even owning the property yet!

Pre-construction investing is a profitable opportunity. As an investor, however, you should do your homework and study and anticipate the market forces in order to make the best selection on the type of development projects and determine the most appealing units within the projects. It is not a matter of simply investing in just any project.

If you are planning to engage in investing in pre-construction properties, factors you should analyze and consider include:

·        The area’s projected economic and job growth

·        Local and regional economic trend indicators

·        The property location in relation to utility and services, transportation and protected air rights

·        Amenities like fitness centers, guest suites, entertainment facilities, room service etcetera

·        Added value facilities and services

To maximize the returns on your pre-construction investment venture, here are some guidelines to keep in mind:

1. Beforehand, determine your investment standards such as the kind of properties you are interested in, ideal return period (months or years) and the amount of money you are willing to invest without risking your financial future.

2. Study related issues and variables with regards to the potential investment. Find out the maximum rates of the local market for buyers and renters. Determine all restrictions on the sale that may impact your profit margin.

3. Establish a clear formula to determine the amount of profit relative to the risk – every investment comes with risk. When in doubt, back out. There will always be other opportunities that you can invest in.

4. Keep in mind that evaluating an investment is a skill, therefore, it is best to find somebody successful in pre-construction investment and interview him or her about any problems they encountered and how they resolved them.

5. Remember that proper timing spells the difference between making a windfall or simply making a profit. As much as possible, try to get in on the pre-construction deal on or before the first day of public sale. Getting in early may give you the right to take advantage of extra incentives and lower prices. Furthermore, getting in early means you can pick out the best investment units, make a decision and complete all the necessary steps without delay.

6. Team up with a group of like-minded investors in order to gather relevant information about various investment properties. Dividing up the workload makes the work easier to complete in less time. Pooling your resources together also gives you a bargaining chip when it’s time to talk to the developer.

Generally, pre-construction investments offer benefits to investors not found in other real estate markets.

Investing in pre-construction provides the investor the benefits of property appreciation without the expenses and hassles of owning real estate.

During the construction period, you only need to invest 10% of the total value of the property you contracted to buy from the developer; if property appreciation is pegged at 10% per annum, you automatically realize a 100% return on your pre-construction investment outlay! It is only on completion of the project that you would have to put up the money through cash or mortgage for the unit you bought.

The important thing here is that you have control over a particular unit while it is under construction and you can sell your contract to another party at current prices on or before completion of construction!