Why Invest in Pre-Construction?
The answer is simple, to make a return on your investment. There are a variety of factors that will determine your return.
1) Your purchase price. Generally, the earlier you purchase during the construction phase, the lower your cost and buyer's incentives will be.
2) Developer Price Increases. Many developers sell their projects in phases and will raise prices as the project moves forward. It is not uncommon for a person who bought in phase 1 of a project to pay considerably less than a person who bought in a later phase. Many developers also raise prices to control the demand and supply ratio.
3) General Economics. The law of economics states that prices increase when there is more demand then supply and visa versa. Lack of suitable land to build on and a dramatically increasing population are both catalysts for price increases.
4) Lack Of Carrying Costs. Aside from the down payment required when an investor goes to contract, there is no other out of pocket expenses (Taxes, Mortgage, Maintenance and Insurance) until the buyer's actual Closing Date, otherwise known as the Settlement. Therefore, an investor can experience and take advantage of the increasing price potential and not pay a dime to carry the property until after closing!
How does the Pre-Construction process work?
There are a series of steps in purchasing a pre construction property.
1- The investor must first sign a reservation agreement and then put down a deposit. (This amount varies depending on the developer. Typically a minimum of $5,000 USD)
2- Once a developer gets the go ahead from the local government , you will be asked to enter into a contract. After a short period of time (the rescission period) the contract becomes (hard). Usually at contract the developer requires a down payment on your property that is being built. This can range from $5,000 to 20% of the total purchase price of your unit. The deposit is normally held in an escrow account and cannot be touched by the developer unless stated in the contract.
3- Certain developers allow investors to assign their contract to another purchaser , others do not allow assignments at all. Many developers offer resale programs that allow investors to sell their property to another individual. If the property is not sold, prior to its completion, the investor must close on the property and then can choose to sell it, rent it or use it for themselves. Be sure to use our expertise in this type of purchase. E-mail us or submit your pre-construction criteria.
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