Preconstruction Investment - The Benefits for the Real Estate Investor
Investing in real estate is a time-honored method of generating income.
There are a variety of ways to work with real estate, some of them more profitable than others.
Though still unknown to the average person, preconstruction real estate investing is gaining popularity with many investors.
It's not hard to understand why, when you take a look at the benefits and advantages of this form of investment.
Unlike some other types of real estate investing, preconstruction allows you to control a property with only a minimal downpayment.
Relatively low cost of entry makes this investment more accessible to the average investor.
The amount of the payment will vary, but typically you'll put down about 5% to reserve the unit.
This is completely refundable if you choose not to sign a purchase contract or if the development falls through.
If you decide to sign a binding contract, a downpayment will be required which can range from $1000 to 20% of the purchase price.
The remainder is not due until closing.
Normally this deposit is held in escrow and the developer cannot touch it unless the contract allows.
This protects your deposit.
Buying property prior to construction lets you enjoy a substantial discount on the price.
The earlier in the process you buy, the lower the price you pay.
Many developers plan incremental increases in price during the construction process (and sometimes in the preconstruction phase).
This often has the effect of building up demand and maximizing appreciation of property values.
It is to your benefit to know about upcoming developments and to be in a position to act quickly.
One way to catch word of new and interesting projects is to sign up for developers' and brokers' lists.
The value of the investment property is almost sure to appreciate, at least in the long term if not right away.
A dwindling availability of land to build on and a growing population ensures you a favorable ratio of demand to supply.
Depending on the developer (not all of them allow it), you may be able to assign your contract to another investor, or resell your unit prior to completion.
This gives you some flexibility and lets you receive your return more quickly.
Choosing shorter term projects (where construction lasts 8-16 months) can allow you to see profits sooner than with certain other real estate investments.
A further advantage is that the investor doesn't need to qualify for a mortgage to make a preconstruction investment.
In fact, you won't pay mortgages, taxes, maintenance, and other carrying costs while the property is under construction, but you will still capitalize on the appreciation of property value during the build.
This offers you considerable savings and frees up funds for other purposes.
All these benefits, and others, make preconstruction investment an appealing option for real estate investors.
As with any type of investing, it is absolutely necessary to understand what you are doing and why.
Be sure to perform your due diligence on any investment that you are considering.
Smart investors who do their homework are the most likely ones to profit from their involvement in preconstruction.
There are a variety of ways to work with real estate, some of them more profitable than others.
Though still unknown to the average person, preconstruction real estate investing is gaining popularity with many investors.
It's not hard to understand why, when you take a look at the benefits and advantages of this form of investment.
Unlike some other types of real estate investing, preconstruction allows you to control a property with only a minimal downpayment.
Relatively low cost of entry makes this investment more accessible to the average investor.
The amount of the payment will vary, but typically you'll put down about 5% to reserve the unit.
This is completely refundable if you choose not to sign a purchase contract or if the development falls through.
If you decide to sign a binding contract, a downpayment will be required which can range from $1000 to 20% of the purchase price.
The remainder is not due until closing.
Normally this deposit is held in escrow and the developer cannot touch it unless the contract allows.
This protects your deposit.
Buying property prior to construction lets you enjoy a substantial discount on the price.
The earlier in the process you buy, the lower the price you pay.
Many developers plan incremental increases in price during the construction process (and sometimes in the preconstruction phase).
This often has the effect of building up demand and maximizing appreciation of property values.
It is to your benefit to know about upcoming developments and to be in a position to act quickly.
One way to catch word of new and interesting projects is to sign up for developers' and brokers' lists.
The value of the investment property is almost sure to appreciate, at least in the long term if not right away.
A dwindling availability of land to build on and a growing population ensures you a favorable ratio of demand to supply.
Depending on the developer (not all of them allow it), you may be able to assign your contract to another investor, or resell your unit prior to completion.
This gives you some flexibility and lets you receive your return more quickly.
Choosing shorter term projects (where construction lasts 8-16 months) can allow you to see profits sooner than with certain other real estate investments.
A further advantage is that the investor doesn't need to qualify for a mortgage to make a preconstruction investment.
In fact, you won't pay mortgages, taxes, maintenance, and other carrying costs while the property is under construction, but you will still capitalize on the appreciation of property value during the build.
This offers you considerable savings and frees up funds for other purposes.
All these benefits, and others, make preconstruction investment an appealing option for real estate investors.
As with any type of investing, it is absolutely necessary to understand what you are doing and why.
Be sure to perform your due diligence on any investment that you are considering.
Smart investors who do their homework are the most likely ones to profit from their involvement in preconstruction.
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