Preconstruction investment has been popular with real estate investors, since a long time. Investments are made in any type of property that has been planned by a developer, but not yet built, which includes townhouses, condos, homes, hotels; just about anything. Purchasing property before it has been built offers the advantage of developers selling preconstruction property at prices anywhere from 5 to 20 percent below the appraised value.
The reason why a developer offers discounts on preconstruction property is because he needs money to finance his project. Sure, he can get the money as a loan from some bank, unless the developer is not a reputed one, and has a construction development plan that appears to be viable to the bank. The bank refuse to shoulder the entire risk involved in financing the project and would like others to share it. This puts the developer in a fix. When he raises money by pre selling unconstructed units to 'preconstruction investors' he is able to achieve two things.
One, he is able to get some ready money to start his development project and two, he gets credentials to prove to the bank that there are other people who believe in his project and have therefore made investments in it by buying property, even before it has been constructed. This eases the apprehensions of the bank to a great extent and lessens its risk in the project. The developer is thus able to gather the needed finance for the project, which is lower than before, as the investors have already funded part of it.
The maximum discounts in preconstruction purchases are available to the earliest preconstruction investors. They may even get additional financial incentives along with the price discounts by way of free upgrades or payment of estate taxes for the first year by the developer. Investors also benefit from the real estate price appreciations that happen in most cases, during the time the project takes to be fully completed. Therefore, by making a wise real estate pre construction investment, the investor profits by building equity not only by making a purchase at a value below the market value, but also by riding on the appreciation wave during the phase of construction.
The flexibility to exit your real estate investment is another great reason for investing in preconstruction real estate, as it offers much greater liquidity as compared to other type of real estate property investment. If you want you can assign the contract to another investor, even before construction is complete and make your exit pocketing a quick profit. Alternatively, you can wait for a longer period and sell later or even let it out for rental income, letting its value appreciate even further.
You may ask, what makes Orlando a favored destination for real estate pre construction investment? There are many reasons, which can be cited as cogent answers to this question. The first is that Orlando is a place having a steady increase in demand for rental property. This is because; it is a favored tourist destination with a large influx of tourists visiting the place for varied periods of time, throughout the year who seek and avail of rental accommodation.
Tourist attraction is also high because Orlando boasts of some of the best amusement parks in the world. The Iraq war is also a potential reason that people avoid going to foreign destinations for vacations and prefer to stay within the country. Orlando is one of the best vacation sites in the country with its pristine beaches, bright sun, tropical weather, abundance of amusement and entertainment sources and a great nightlife. People are investing in Orlando real estate also because of the present state of the bourses taking into account the weakness of the dollar.
These are reasons enough from among many other good reasons, why Orlando preconstruction investment is of great value and should prove sufficient to make you sit up, take notice and act right away, if you do not want to miss the bus for making profit generated from real estate investments.
Preconstruction real estate investments are investments in 'yet to be completed' construction projects. Completion may still be six months, a year or two years away; may be even more. An investor is able to put in a small deposit to book/hold a condo or apartment in the project till it is complete. He can then sell the property to capitalize on the price appreciation from the date of investment.
The preconstruction investment is found quite lucrative to most investors on account of its simplicity and low risks. Since the investment is small and has to be made in cash, there are no mortgage related hassles or expenses. There are no taxes involved and the investor just needs to sit tight and keep a watch to see that his investment keeps growing with the appreciation in real estate prices.
Preconstruction investment in Miami is of particular interest on account of the rate of appreciation in property prices over the last few years. It has been observed that the average rate at which real estate prices have been rising annually in Miami has been close to twenty-five percent. In the case of an investment in a constructed house for rental income, there is no need to manage tenants in a preconstruction investment. And the absence of mortgage related issues means that a developer will sell a preconstructed condo/apartment unit irrespective of credit history ratings.
On the basis of available figures it is safe to assume that investing $100000 in a $500,000 condo in a preconstruction stage project in Miami can net in $100000 in price appreciation in one year. The down deposit required by the developer in a preconstruction property is around 20%. Therefore a condo priced at $500000 will require a down deposit of $100000; half to be paid at the time of contract and the other half at the beginning of construction. Based on a conservative estimate of 20% annual appreciation in real estate prices as per current trends, the under construction condo would be worth $600000 after one year. This would be a straight 100% annual return for the first year on the investment. Simply stated, the capital invested would double every year.
Preconstruction investment is especially attractive for Miami real estate because of the influx of large number of people into Miami including buyers from outside the US interested in taking advantage of the flexible rules available to foreign nationals who want to purchase Miami real estate. Waterfront property is the most in demand, being preferred by such buyers including those from States like New York and California and others.
Instead of rushing headlong in a preconstruction investment, it is very important to gain detailed information before making the actual investment. This is because every developer or every property is not desirable from the investment angle. A project may not be well analyzed or priced right. Therefore it is best to seek the services of a local realtor to overcome such difficulties while making a selection for the investment. Talking directly to the developer or his staff may not yield objective information.