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The Benefits of Preconstruction
It is a commonly held notion that real estate is one of the most stable and lucrative ways to invest your money. Naturally, as the opportunities and ways to invest have evolved over the years, investment real estate has become much more accessible to the average investor. The easiest and most cost effective technique for investment that has come to the forefront of real estate investment in the past few years is preconstruction real estate. Preconstruction is a very simple concept that has many investors wishing it was always an available option. Essentially, preconstruction is a natural discount investment strategy that is effective for a few reasons.
Developers are selling a future property in-order to get money down on the project. Many times, the most effective preconstruction investments are through a condo hotel or a resort property. If one were to visit this property directly after purchase, they would see an empty or partially developed property. This is because the properties are purchased before construction is finished. This brings up another reason why there is a natural discount.
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A plot of land can only be worth the market value. Once the land is broken, the property value will start to increase. The earlier that you buy in, the less expensive the property, and thusly, the greater your final ROI. This is why an investor can often flip a property before it is finished and still make an incredible return on investment.
Additionally, one has no risk if a project fails. Developers hold the money in an escrow account for such an occurrence, even though rare. You recieve your money back from the developer.
Finally, preconstruction real estate is not advertised, so money that would have been spent on advertising is now money saved. It is primarily available through a limited number of master brokerages that sell off the properties to investors. If you are not in one of these brokerages' networks, you do not have the opportunity to purchase the property.
One of the most viable real estate markets is South Florida. There are preconstruction opportunities popping up in Orlando, Miami, Fort Lauderdale, Panama City, and many other areas. Condos, suites and townhouses that are purchased in the preconstruction phase are being snatched up at record rates. This is primarily due to the emergence of investment real estate brokers offering more preconstruction properties to the general public.
Very few brokerages actually offer preconstruction real estate. Yaerd's national network can be utilized to provide you with information on preconstruction investment and preconstruction brokerages near you. Call us today or fill out the form above for more information.
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There are 3 general stages to follow when investing in a preconstruction real estate property. You have a chance to make some earnest money. Remember, this is an investment; its value will increase over time
Reservation Stage – The investor normally gives a minimal amount of cash funds to the developer, normally in the amounts of $5,000-$20,000. By putting a minimal amount of money down, you are forming a non-binding contract with the developer called a preconstruction reservation. In the case of a cancellation or price increase of the preconstruction real estate project the investor receives a full refund.
Contract Stage – The contract stage begins, when the developer and the investor enter in a binding contract together. The investor is required to put down anywhere from 5% to 25% of the cost designated by the developer. The developer is prohibited from raising the price of the preconstruction real estate property. Remember, that before you sign that contract you are eligible to back out of the reservation agreement and collect compensation.
Selling/Assigning Contract - If the developer offers a resale program to the investor, he/she is allowed to sell the preconstruction real estate property to another buyer. If a resale program is not offered to the investor then he/she must close on the property before it may be sold, rented out, or used for personal use.
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