PRE-CONSTRUCTION

INTRODUCTION Buying Real Estate Selling Real Estate Pre-Construction About South Florida Our Philosophy Contact Information	. To main page > . Buyer's Guide > . Buying Property > . Selling Property > It might not seem necessary to involve a real estate professional in a transaction where a buyer can deal directly with a builder. Think again! A real estate professional representing the buyer's interests, can guide you along the right path, smooth the rough places and help ensure you make a decision you can live with (and in) for many years. Here's how: Just as a real estate professional calls on experience and knowledge of an area to help buyers locate pre-owned homes in a community, he or she can also direct buyers interested in newly built homes to developments and communities that match client specifications. An agent can suggest builders based on their reputation for delivering a high-quality product, responding quickly to issues, and being financially sound. An agent may be familiar with how a builder prices his products and where there may be room to negotiate price or upgrades. Without agent representation, you are one buyer purchasing only one home. But an agent can significantly impact a builder's bottom line by providing a steady supply of customers. The agent's leverage may work in your favor at the negotiating table. [Note: The builder may require your agent to accompany you on your first visit to the site. Check with the builder.] When relocating to a new area, agents can be particularly valuable resources. In addition to providing local area information regarding schools, day care or elder care services, public transportation, proposed development, and so on, once construction is under way, an agent can periodically stop by the work site, supply you with progress reports, and photograph or videotape phases of the construction. An agent can assist you as you face hundreds of design choices and consider which upgrades could potentially add value to the home when it comes time to sell. An agent can accompany you at the site while you okay the plumbing and electrical locations prior to drywalling, as well as on the walk-through or builder orientation. By now, you should be convinced of a real estate professional's value as you search for and purchase a newly built home. Still, here is one more great reason to work with an agent-the builder pays the agent's commission. You enjoy individual attention and support at no cost to you. What a great way to start life in a new home!  Benefits of pre-construction purchasing, mention advice and expertise, local areas a examples of projects, pre-construction prices and after prices.
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As an example, in this stage you will learn terms like reservation, hard contract, assignment of contract, letter of credit, to name a few. Even if you are new to investing, don’t let that intimidate you. Whenever I teach a class on this topic, it only takes about 30 to 60 minutes to get everybody up to speed on this.

So how do you learn the mechanics of being a preconstruction real estate investor? My suggestion is to take advantage of the free resources available on the internet. For example, at GetPreConstructionDeals.com we give a way a 30-page ebook about preconstruction investing that will walk you through this basic terminology and will give you some real world preconstruction real estate project examples. Also, if you conduct an internet search on “preconstruction” “preconstruction investing” “preconstruction condo”, etc., you will find tons of websites with this type of information readily available. Give yourself an evening or two and you should be a master. Unfortunately, over 80% of new investors stop after Step 1 and immediately want to look for “deals”. In my opinion, this is a big mistake because they are lacking what separates the beginning investor from the street-seasoned preconstruction investor; the methodology to RAPIDLY pick “smart investments”

FINDING PRECONSTRUCTION PROJECTS
If you did an internet search in Step 1 above, did you notice how many real estate web sites you found with preconstruction investments on them? If not, simply put in the term “Miami preconstruction” in any internet search engine and you will see the number of results. Here is a test for you. From the internet searches done above, can you rapidly look at those projects and choose which ones might be worthy of further investigation? Most people become overwhelmed at this point whereas most savvy investors could sort through most of these in a matter of minutes.

Over the years, in both the stock and the real estate markets, I have had the opportunity to work with some truly outstanding investors and I have also seen many, many beginners. When a beginner looks at a preconstruction investment, they ask the real estate person “How much will I likely make on this investment and should I buy it?” When an experienced investor looks at the same investment, they first ask THEMSELVES “Is this investment really low risk and if so, how much money is really at risk?” Then they ask THEMSELVES “How much money am I likely to make if this investment works?” In their mind, they are trying to determine the amount of reward, relative to the risk. They know that the person marketing this project is UNLIKELY to think this way but they know how to ask the right questions to quickly decide if this project has an acceptable reward-to-risk ratio for THEMSELVES.

If you are reasonably new to investing, or have always counted on others to make investment decisions for you, how do you perform Step 2? Simple. You must learn how a savvy investor thinks, how they calculate risk, what back-up plans they have in place in case the investment does not work, how they calculate reward, etc. None of this is rocket science or even difficult to do. If you’re new to preconstruction investing and are trying to do all this on your own, it can be a daunting task, however. I find that truly savvy investors are always talking to others, getting their opinions, learning anything they can to make THEIR OWN decision. They know that every little tidbit they can learn can literally mean several 10’s of thousands of dollars into

Practically, you need somebody to mentor you that has “been to the dance” many times before. If you know somebody in that category, buy them lunch, dinner, movie tickets, whatever and ask if they would look over your shoulder. If you know several people in this category, better yet. Your lunch bills will be pricey but your education gained will be priceless.

In addition, learning to think like a savvy preconstruction investor is the reason that we created our original home study course as well as our more complete live teleseminar course. Many people don’t have someone to turn to other than maybe the real estate person bringing them the project. I personally find that most real estate agents/brokers are fantastic resources for information, however most do not analyze the investment like I would. If you ever find yourself asking your agent or salesperson if “they really think you should buy this,” then that is probably a good indication that you are ill prepared. their own pockets.

No matter how you accomplish it, learn to think like a savvy investor for YOURSELF; it just is not that hard to do.

GROWING YOUR PORTFOLIO
Once you think like a pro in Step 2, you will have just created a problem for yourself: you will probably find that few preconstruction projects will fit your objectives. New investors tend to think this is like the stock market….. When they are ready to invest, you should just be able to plunk down your money and move forward. Realistically, in the stock market and the preconstruction market, TRUE OPPORTUNITIES appear when they are good and ready. When that occurs, and only at that time, then the savvy investor will pounce with lightning speed. Remember, for many people, a couple of good investments PER YEAR is plenty and may then more investment returns than they ever dreamed possible.

While this may be hard to imagine right now, after Step 2 you should have a clear understanding of the type of investments that you would consider. As an example, suppose you end up concluding that you really like condo/town home projects, not on the beach, and in the southeast. In addition, you want these investments in some emerging markets but not necessarily those that have been explosive for a long time. Great! Now start getting on lists of brokers/developers that bring out those projects. If you can work with a group of like minded people, all the better because you can share the workload and also have additional clout because of a higher potential buying power than just one individual.

I will caution you however that when you think like a savvy investor, you are going to want a lot more information than is typically provided by these types of sources. You will want a true assessment of the local market (other than “boy has this been hot”), you will want a true assessment of the amount of similar projects that have been or are going to be offered, and you are going to want to know a lot about who is buying these projects and why.

Because we like a lot of detail and because we know we have to move very quickly for good investments, we have always found it better to operate as a group, rather than one lone person trying to sort this out after work. In addition, we have found that by pooling together the buying power of a group we can get much better access to really good investments.

It is for these reasons that we at GetPreConstructionDeals.com have created our “Mastermind Group.” I hope this has given you an understanding of the 3 steps needed to become a true preconstruction investor. Some people will look at this and say that it is too hard, or too time consuming. Yes it will take some time and some effort. The question that I always ask them is then “How many hours in your regular job would it take you to make some of the large $75,000+ returns that some preconstruction investors are making?”

Financing Options When buying a property in a preconstruction process
When you are buying a property in a preconstruction process, you will have two times when you may consider financing:

1) When you go to hard contract; and

2) When (if) you close on the property.

In this article, we are going to look at both of these types of financing.

At the time of going to hard contract, you will have to put down anywhere from $1,000 to 30% of the project, with 20% typically being the norm when this article was written. For many projects, all of this money does not have to be in the form of cash but can be a letter of credit instead.

So let's look at an example. Suppose you wish to acquire a preconstruction condo price at $350,000. If 20% is required, then this implies that you will need to bring $70,000 to this deal at the hard contract stage. Of course, if you bring this in cash, then you have tied up that amount of money for the duration of the construction project.

What many investors do is obtain a line of credit from their local bank. Depending upon the credit history of the investor, equity in other projects and their home, and many other considerations, the bank may be able to approve either a secure or unsecured line of credit for you. Now, you simply put down some (or zero) cash towards the hard money contract and then the bank provides a line of credit for the remainder.

If an investor uses lines of credit, or home equity loans, or any other leveraging techniques, they must be careful since if things do not work out as expected, then they may suffer a devastating loss. We always encourage any investor using large amounts of leverage to thoroughly educated themselves on any possible risks before undertaking such an activity.

After construction is complete, if the property has not been flipped, then investor must close the deal and make the balance payment. You must prearrange for taking a loan or mortgage to make the balance payment needed for closing the deal, because if you fail to pay and close the process, you will lose your down payment.

Taking a loan for balance payment for your preconstruction project is an easy job (if you have good credit) because the lenders or financial institutions would take your condo as collateral for the loan. However, before taking the loan for closing a preconstruction purchase, you must make yourself aware about the different choices available for financing.