The concept of pre-construction investments when it comes to real estate is really quite a clever method through which many have made millions. The theory is simple actually. Invest in a property during when it is in the planning stage. Those who will be building these buildings need money and investors in order to do get the building off the ground. By investing (in many cases basically purchasing options to purchase) in the units, typically condo units in high demand areas, before the ground is broken investors often have the option of investing for pennies on the expected dollar once the building is complete and can re-sell the property at full market value once the building is complete banking the difference in the original investment and the asking price.
This is a win-win scenario for many ‘owners' or builders of the property in questions since 'pre-selling' the units permit lending agents to have assurance in the profitability of the project as a money earner by selling many of the units sight unseen. The advantage to investors is that they are able to buy at a much lesser price pre-construction than later and can sell later at the full market worth (or above in some high demand and undersaturated areas for real estate).
This type of investing is not nearly as stylish to some as flipping houses. There is no beast to beauty renovations. There are, however, some things that should be kept in mind while making this type of transaction.
First of all, no real estate venture is ever guaranteed to turn a profit no matter what the glossy little brochures tell you. With the current developments in property sales, this is usually not the best environment for pre-construction investing although these things tend to change on a regular basis and that market could be going up again in the very near future.
Secondly, networking is more often than not the best method to break into this specific business. There are all kinds of fly by night would be real estate investors. The ones that manage to last are those that network with other real estate agents as well as those who have specific interests and experience with pre-construction investments.
Join local groups in addition to online groups that focus on this sort of investment in order to get more information quickly. The costs needed might appear discouraging at first but they are far less than the costs of getting in over your head by not having a hold of even the most basic 'ins' and 'outs' of pre-construction real estate investing.
Thirdly, build a close-knit relationship with a realtor that focuses on this specific type of real estate investing. This could show to be the most valuable thing you will ever do so as to insure future success. By increasing the right relationship with the right realtor you can get information on new estates before they make it to the public sector. This puts you in the rare and wonderful position of beating the competition to the punch. This gives you a much better shot at receiving the rock bottom prices that are often missed by waiting too long to make the purchase.
Fourth, be prepared to hold onto the property for a little while if you need to do so. The issue with pre-construction investing is that there are no assurances that when the time comes you will have been able to 'seal the deal'. Things come up even when you have a buyer that is interested and willing to buy it. In other words, there are times when you will need to hold onto the estate for some period and sometimes as a long-term investment. Some options in the case of long-term holds would include renting the property out to vacationers if it is in a high demand tourist area. You can use your realtor to help with that. This allows the property to be earning some income until the sale can be made. Others decided to hold onto the property as a personal vacation home for themselves, friends, and family. Ultimately, the important thing is that there is a "Plan B" for the property should the deal go through and you are left paying the monthly note.
Pre-construction property investing may not have the 'name in lights' appeal that other types of investing carry, however, it does give a viable investment style that has the possibility to bring in significant profits. Profit is the name of the game when it comes to investing. So keep this in mind when thinking about your investment options. This is one of the types of investing that needs (in most cases) the least amount of capital up front.