Preconstruction investing is steadily growing in popularity among the real estate investment community. This is primarily due to the fact that preconstruction investing provides benefits that are not available with other types of property investments.
Preconstruction investing is just that, sealing the deal on an investment property before construction is complete on the project. Presently, the property is nothing but a vacant lot. Over the next year or so, the property will be constructed. During that time, a few things happen that make preconstruction investing quite appealing.
Lock In A Lower Price
The first unique occurrence that takes place when you invest in preconstruction properties is that you are able to lock in a lower price than what you will be able to get once the property is complete. As a property develops, the price continues to rise from one level to the next, so it is critical to know when to invest.
When you invest in a property that is in the preconstruction stage, in most cases you will not be required to take out a mortgage. When no mortgage is required, there are also no payments required. The completion of construction will come through the developers’ financing. You will not have to get a mortgage until the construction on the property has been completed, and if you are planning to hold on to the property for an extended length of time. Several who invest in preconstruction projects generally sell the properties prior to reaching this point, and never have a need to sign for a mortgage at all.
By securing a discounted investment price in the beginning, as well as throughout the appreciation cycle, you will be set up to be successful. Once the project completes, you will be in an equity position that will allow you to make a profit as an investor. In addition, new construction is the easiest kind of real estate to sell, which works to expedite your strategy for exit.
Property Options Australia
Property Options Blog © 2006 – 2009
hi there, just wished to mention thanks for this post, it assisted me perceive one thing I hadnt given much thought to it before.
Glad the post was of help to you Michael. Happy investing
Hi Sean,
I’d never heard of preconstruction investing until I started reading your blog. Is this what is meant by buying off the plan? It sounds like a great strategy in theory. I just wonder what the drawbacks are.
Nor had I heard of preconstructed investing, but purchasing a property or investment property proir to building makes sense. As when the visual aspect increases so does the price. What a good tip to get in before construction, I hadnt given this much thought.