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Profiting in Pre-Construction Real Estate?
By Mark Walters
Apr 21, 2005, 19:19
The pre-construction process is an innovative real estate investment opportunity in which you buy tomorrow's property at today's price. With house prices booming, this information is incredibly timely!
Pre-construction investing is a boon for the investor or buyer as well as the developer or builder. The biggest advantage of pre-construction process is that you can reserve your buy at discounted prices without investing a fortune.
You simply have to make a small investment that is as low as 5% of the total cost to reserve a unit and pay the balance on achievement of different milestones.
For the buyer, pre-construction process provides an opportunity to seal a property deal with little margin money and achieve sizable discounts over the tentative price of the finished condos.
For the developer it is an opportunity to presale the entire property even without laying a single brick and to procure a construction lending with relative ease.
In the pre-construction process, property developers place the building plans of a proposed real estate venture for pre-selling.
Only thing made available to the buyer are architectural rendering and floor plans of the condominium, town house, or single family residence.
The good news is that pre-construction prices are normally at an attractive discount of the proposed sale price of complete units.
In theory, the buyer gets the discount because they displays the grit and tenacity to invest on mere paper and "air".
However, in reality, they are getting discounts because the are a crucial piece of the puzzle for the developer because pre-selling of a particular percentage of the total units is a need for getting a prospective lender to fund the construction process.
If you are interested in investing in pre-construction property, you can check out the list of pre-construction offers available in your locality in the newspapers, on the Internet or with your real estate consultant; that is if you have those types of projects in your locale.
When you have the list, you can shortlist the offers that are suitable according to your budget and needs. After that you must run a thorough check on the property and the developer on many issues.
Certain key reasons are, the going and expected cost of the similar units in that locality; demand supply factors; whether the units are assignable and uniqueness of the property.
You must also check for the future or proposed development plans in the vicinity to protect your view. This aspect is important because you might choose to buy an apartment in a pre-construction process at a premium
due to the prefect view of lake or waterfront.
However, after some time you may find out that another developer is building a project, which may blind your view.
After you have satisfied yourself with the suitability and pricing of the condominium, you can proceed for the reservation. Most pre-construction properties have a nominal reservation amount, which is normally 5-10% of the total cost and can go a slow as $1,000.
The reservation process has a simple "Intent to Purchase Agreement" in which you hold the right to first refusal. In this phase, you are safe because your money is in escrow account and you can terminate the agreement without any obligation.
Of course, the developer is not really bound to any prices yet at this stage either so both sides are in a loose arrangement.
I know someone who's an expert in pre-construction real estate investing by the name of Chris Anderson.
To learn how he does it go to?lt;br>
http://digbig.com/4ddgd
I've personally viewed how Chris does it and it's nothing less that impressive. He offers all kinds of information, much for free.
I want to state this again, “with house prices booming, this information is incredibly timely!?lt;br>
You can decide if this relatively untapped area of real estate investing is for you by visiting?lt;br>
http://digbig.com/4ddgd
About The Author - Mark Walters has written
"Single Family Homes - The No Risk Investment".
Cash Flow Institute LLC
9800 W Peoria Ave Suite 2
Peoria AZ 85345
info@cashflowinstitute.com
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