Pre-construction Investments

What is Pre-construction Investments?

Pre-construction investments are homes, whether in the form of townhouse, house, or condominium, that are purchased before they are built. There is no touring around with a real estate professional viewing homes. These are bought from blueprints and an artist's drawings. And they can be had at a rather reduced price. The reason for this is that the developer is trying to raise interest in his development project. The more homes he can sell before construction begins, the more eager the bank will be to loan him the money he needs to build. As an incentive to get people interested, the first few homes are sold at a "bare minimum" price. Here is where an investor can really cash in. By buying one or more units as pre-construction investments, as each home is called, the investor simply has to wait for the project to finish to make his money.

How is that money made in pre-construction investments?

Imagine you decided to only buy a single home at the onset of the development as one of your pre-construction investments. Now imagine that construction is finished. During the building phase you will have noticed that the price of the remaining homes gradually rose to just about that of the existing homes in the area. Having bought your pre-construction investments home when you did, you've paid far less. This is how the profit is realized. If you resell your home now you not only get back the money you invested, but also the difference between what you paid and the present, going rate. You can choose to keep the home and rent it out for extra monthly income, or live in it at far less than what your neighbor may have paid. Then, in the future, you can still resell with, possibly, an even bigger profit. That’s pre-construction investments at their best!

But suppose you had decided to buy two or more homes. The pre-construction investments options now could let you retire early. You can, again, resell all your homes and live happily ever after. Or you can sell all but one and live relatively mortgage free. Or, on a more long term basis, you can rent out the homes at the present, going rental rate which will be far more than what you paid for the units.

Remember, when purchasing pre-construction investments, developers will give added bonuses and savings to investors as an incentive to buy more than one unit so the more you purchase the bigger the eventual profit.