Pre-Construction Real Estate Investing

Pre-Construction-Real-Estate-Investing

If you’re a heart and spirit of a gambler or enjoy extreme sports like skydiving, jumping from bungees, then you could be the perfect candidate for real estate investment in pre-construction. The profits from pre-construction are usually among the top in the business. But, as are the risk factors. You can find the highest highs and lows encountered in the realm of real estate investment in the pre-construction earnings. Many of the famous names we are familiar with in the realm of real estate investment have earned their fortunes via speculation and sales prior to construction.

Before I get any further, a word of caution must be uttered. Although the chances of making money in this particular segment of the real estate market is unusually high, the risks are too high. This is speculation property at its best . As we’ve seen over the years, when a bubble bursts in one particular market, those who are highest stakes are the ones who usually suffer the most.

In terms of what is pre-construction real property, there are several possible interpretations. The first one is the most straightforward. Real estate is something you purchase at some point prior to when construction is completed. In hot markets , you’ll usually need to buy units prior to breaking ground on the construction project, in order to obtain the lowest cost for your investment, and the greatest chance of a return on your pocket. After you’ve bought your unit you intend to sell, you’ll begin looking for buyers for these units. If you’re in a market that’s in a state of flux, such as some Vegas suburbs, as well as large resort cities and retirement towns along the Florida coastline , it is not unusual for the property to be sold and have multiple owners prior to the property being completed. Every one of them will take something to take home for their efforts, with those who are the first in line usually taking the biggest slice of the pie with the most.

You might be wondering how this is happening and the solution is really quite straightforward. If contractors try to raise funds for their structures in these massive complexes, they typically need some percentage of the buildings “pre sold” in order to convince banks that there’s a suitable market for the property and also to earn some of the money required to get the project in operation and running, or so it’s called. Real estate investors purchase these units at bargain prices since they’re paying for the concept of the unit (which isn’t currently been built , and isn’t permitted to be constructed in many instances) instead of an actual brick and mortar building. As the project gets nearer to its completion specifically in those areas where real estate is highly sought-after and the worth of the home increases rapidly, resulting in astronomical profits for those who manage to stay in the game.

There are a lot of risks. There are many possibilities for things to be wrong with a project like this, not the least of which is the demand for housing won’t be satisfied before the housing unit is constructed. This has already happened and will continue to occur. Additionally, recessions, business closures collapses of economies, and disasters in the area could occur before the property is finished, leaving anyone who has put their money into the project with just a amount of cash and losing their earnings and, possibly, their investment. The projects typically require a considerable amount of time to complete , which means the risk is higher and the likelihood of these events harder to predict in advance. If you manage to get through, the majority of investors will see over 100 percent return on their investment , making it a very popular investment for many, despite the huge risks that are involved.

Join The Discussion

Compare listings

Compare