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Dramatic Profits From Preconstruction Real Estate Investing
he preconstruction process with relative ease.
is an innovative real
estate investment In the the preconstruction
opportunity in which you buy process, property developers
tomorrow's property at today's place the building plans of a
price. Preconstruction investing proposed real estate venture for
is a boon for the investor or pre-selling. Only thing made
buyer as well as the developer or available to the buyer are
builder. The biggest advantage of architectural rendering and floor
preconstruction process is that plans of the condominium, town
you can reserve your buy at house, or single family
discounted prices without residence. The good news is that
investing a fortune. You simply preconstruction prices are
have to make a small investment normally at an attractive
that is as low as 5% of the total discount of the proposed sale
cost to reserve a unit and pay price of complete units.
the balance on achievement of
different milestones. In theory, the buyer gets the
discount because they displays
For the buyer, preconstruction the grit and tenacity to invest
process provides an opportunity on mere paper and "air". However,
to seal a property deal with in reality, they are getting
little margin money and achieve discounts because the are a
sizable discounts over the crucial piece of the puzzle for
tentative price of the finished the developer because
condos. For the developer it is pre-selling of a particular
an opportunity to presale the percentage of the total units is
entire property even without a need for getting a prospective
laying a single brick and to lender to fund the construction
procure a construction lending process.
of lake or waterfront. However,
If you are interested in after some time you may find out
investing in preconstruction that another developer is
property, you can check out the building a project, which may
list of preconstruction offers blind your view.
available in your locality in the
newspapers, on the Internet or After you have satisfied yourself
with your real estate consultant; with the suitability and pricing
that is if you have those types of the condominium, you can
of projects in your locale. When proceed for the reservation. Most
you have the list, you can preconstruction properties have a
shortlist the offers that are nominal reservation amount, which
suitable according to your budget is normally 5-10% of the total
and needs. After that you must cost and can go as low as $1,000.
run a thorough check on the The reservation process has a
property and the developer on simple "Intent to Purchase
many issues. Certain key reasons Agreement" in which you hold the
are, the going and expected cost right to first refusal. In this
of the similar units in that phase, you are safe because your
locality; demand supply factors; money is in escrow account and
whether the units are assignable you can terminate the agreement
and uniqueness of the property. without any obligation. Of
You must also check for the course, the developer is not
future or proposed development really bound to any prices yet at
plans in the vicinity to protect this stage either so both sides
your view. This aspect is are in a loose arrangement.
important because you might
choose to buy an apartment in a Once the developer gets the
preconstruction process at a needed licenses and permissions
premium due to the prefect view and has the legal authority to
sell the units, you can enter hard contract, you should check
into a hard contract. At the to see if you have the rights to
time of signing the hard assign the property to a
contract, you have to make qualified intermediary. If you
balance up-front payment. would like to play safe, take a
Usually, the upfront payment is professional opinion on the terms
20% of the total cost of and conditions of hard-contract
completed unit but can be more or for preconstruction purchase.
less. You can pay by a direct
deposit with the builder or The construction phase normally
through a letter of credit. After lasts for 6 months to 2 years
signing the contract and making (depending on project type) and
an up-front payment, you do not you have an expiration date on
have to make any other payment the hard-contract. If the builder
until the unit is ready and you fails to complete the
close the deal and take construction and handover the
possession. possession, you can claim for
refunds and will have no legal
However, before signing a hard obligation to buy the unit.
contract you must be careful During the construction period as
because by signing it, you are the building would move towards
entering into a binding completion, there is typically
commitment to purchase the unit, several price increases but of
failing which the builder can course, you cannot absolutely
forfeit your deposit. In some count on that happening. If you
states like Florida, you have a are able to find a suitable buyer
15-day rescission period during prior to closing, you can resell
which you can withdraw from the the unit and claim your profits
hard-contract without any on closing of the deal.
obligations. Before signing the
If you have not assigned the
contract until the completion, There are a lot of things to
you will have to close the unit. consider when entering into a
Closing in preconstruction preconstruction investment and we
process is similar to all real strongly encourage you to learn
estate deals and you have to make all the do's and don'ts.
the balance payment with Hopefully this article has given
additional payments like the you an overview of the process.
association fee as disclosed in
the "Good Faith Estimate".
About the Author:
Chris Anderson is a leading authority on preconstruction real estate investing. Get his 4 day e-mail course and a 33 minute video free today! Visit http://www.GetPreconstructionProfits.com & http://www.GetPreconstructionDeals.com. In addition, Dr. Anderson is the on-line training coordinator at the Van Tharp Institute, a group that provides world class training for investors and traders.
Source: www.isnare.com
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