New Investor needs advice on pre-construction


I am new to RE game and am looking for some advice from a seasoned investor. I am in process of working out a deal for a pre-construction in Miami, FL. It is a new high rise that will break ground in 3 months. The location is great and there are several retail shops and amenities that are being built next to the building that I believe will attract future homeowners. My questions is that I have to put down 20% in order to secure the contract. The building’s expected completion date is 2007. The building will offer a resale office that will charge 6.25% to resell the unit. I am anticipating that this unit will generate a substancial profit that once I receive the proceeds I can use that money to buy several income producing rental units. I have to put down 20% and if I resell the contract within a year I will get back my 20% but I will not get the profit until the unit is closed on by the new buyer. The 20% is 80K which I am contributing 10% and another investor is contributing the other 10%. With the current RE conditions in Miami we expect that the unit will go up conservatively 17% within a year. Nevertheless it is a prediction and am not sure how the conditions will change with interest rates going up. With a possible 17% profit within 12-24 months is it smart to invest 10% for that amount of time if there is no immediate cashflow that will be generated? Also, if anyone has experience with pre-construction and resales I would love to hear your opinion?

Just came across your posting.

I may be old fashioned, but I look at rate of return and downside risks!

In a sense, you will be sitting on $40,000, netting you $6,800 over possible two years. Now, we are talking about single-digit returns if the real estate market stays the same.

Really not sure what your investment strategy is, but for me, I do not look at anything unless I can realize at least a 50% annualized return for flippers, and/or a very high CAP Rate for income-producing properties.

Do your homework on management and the numbers!

Take care,