Market your new home prior to completion. (Allows you to have a buyer waiting to purchase your home prior to its completion)
Ease of Resale. (Large pool of potential buyers for completed new homes)
Ease of Rentals. (Large demand of potential renters for new homes)
Preconstruction Real Estate Investments
The preconstruction real estate investment process is an opportunity that allows investors to purchase the finished properties of tomorrow at today's lower (preconstruction) prices.
While this relatively new program provides an excellent opportunity for all the parties involved (investors, builders & developers), the biggest advantage falls to the investor who gains the chance to buy their pre construction home at a discounted price, without being required to invest a large amount of out of pocket money. Most preconstruction investment programs require an initial investment as low as 5% of the total costs of the home. As the buyer (investor), the pre construction opportunity allows for a limited investment, while receiving substantial discounts over the future price of the finished home.
Pre construction investment programs benefit the project developer by allowing them to presale the entire development property before any construction begins, allowing them to obtain the lending for the project with relative ease. To begin the process, the property developer puts out for pre sale the building plans for the proposed development.
At the time of this presale, the buyer does not see the finished product (which is where we get the term "preconstruction" investment), only the floor plans for the future homes. Because of the buyers willingness to invest without seeing the finished product and the fact that they are helping the developer achieve the required percentage of pre sold units for construction financing, the prices for these homes are usually at a significant discount below the proposed price of the finished unit.
Once the investor has selected their floor plan and the lot location, the next step is placing the reservation. As previously stated, most preconstruction properties have a very reasonable reservation amount; at contract or at the beginning of construction normally between 5 and 10% (with some programs hitting up to 20%) of the total cost for the home, plus closing from 3 to 4%. An example of this low out of pocket investment amount can be found with the current preconstruction program
being offered on this site, which requires an investment of only $5,675.00 complete out-of-pocket for a $240.000.00 new home. That's an excellent use of leverage with only 2% all in.
After the proper paper work has been completed and funding has been finalized, the next step is the construction phase. This phase will normally last anywhere from 6 months to 2 years depending on the type of project, with single family homes typically taking only 8 to 12 months. During the building process, there may be several increases in the value of your home. At completion, you can sell your home and harvest the built up equity - appreciation or rent it out for cash flow. For those who plan to sell, it can be marketed 3 months prior to completion.