In recent years, pre-construction investing has gained popularity amongst real estate investors. The reason for this is because pre-construction investing offers some unique advantages that other types of real estate investing simply cannot offer.
The term pre-construction investing means locking up a property before the property is built. Currently the piece of property is nothing more than a vacant lot. Then, over the next 12 to 24 months, the project moves through the construction phases. We have identified some elements that are unique to this type of real estate investment that makes it so appealing.
The very first thing that an investor is able to do with pre-construction investment is lock-in the price on his property at a price that is lower than what the price will be after construction has been completed. As a development nears completion, the prices continue to increase.
In addition to the price increase on the front end, values also increase through appreciation. This is particularly noticeable in two types of markets, (1) A market that is currently appreciating, (2) A market that will soon be appreciating. By only investing in the right markets, we have added an additional profit center to our investment. While the property is being built, it is also appreciating in value.
When a property is pre-construction, in many cases no mortgage is required. And if no mortgage is required, no payments are required. The construction is being completed with the developer’s financing dollars. There is nothing greater than being able to make money using other people’s money! You will not need to obtain a mortgage until the property is completed, and if you decide to hold on to the property long term. Many pre-construction investors opt to sell their property before that point, and do not need to qualify for a mortgage at all.
By obtaining a discounted price on the front end and appreciation during the build cycle, we have set ourselves up for success. By the time the project is completed we have obtained an equity position that allows us to profit as an investor. We also have the type of real estate that is easiest to sell – a brand new construction. This further expedites our exit strategy.
As you can see, pre-construction investing offers some significant advantages that other types of real estate investing simply cannot offer. This is why many real estate investors have one or two pre-construction properties churning away in the background while they are also involved in other types of real estate investing.
When pre-construction is done in the emerging market, you can obtain a very large return at the end. We will look into this in next month’s article.
If you have questions regarding this article, please feel free to contact our office at 514-680-3279 for a quick response.
PI Global Properties Group - www.pi-globalproperties.com
PI Global Properties Group offers hands on high return investment properties and education-based seminars in the fields of real estate and personal growth toward financial freedom.
Not to be copied without permission.
