could someone tell me the pros and cons of investing in pre-construction. could you tell me your personal experiences. what are some of hot areas to invest in thank you
nobody?
i think there are 2 types of pre-construction opportunities. the first and probably the most prominant is the standard lure of grabbing a bunch of people and getting their money to actually fund construction. the other type is working directly with specialty investment groups and builders who have projects where they pool together investors who invidually buy properties and hold those properties. A main difference between the 2 types is that some of the first type are really raw land deals they need up front money to get started. It might take quite a while before the project is complete. The 2nd opportunity is with established builders and investment groups who do this every day. They find projects ready to go and can finish a unit in about 90 days from time of closing and either have a buyer for it or renter for it before it gets complete.
The 2nd type might be more of interest. Usually the 2nd type gets you into a property much faster and you know the numbers up front and the entire project is complete much faster.
thanks for the responses, but for an investor wouldnt a longer completion time only help the appreciation of the house and property
I been doing preconstruction for about 5yrs now and the boom has pretty much ended in most cities. There are still deals out there, but do not bank on large returns of 50-100K per deal…
Look for assignable deals where you put down 10% standard and can sell whenever…Just check the contract on terms of flipping earlier. Some builders want profits from it…
Other types are where the builder uses there funds to build and no loan quailfying (assumables also) till home is completed. Generally downpayment is from $2500 to 5 or 10% down also.
Then you have where you must close loan first, then they build. Can be very small to no downpayment depending on equity position and bank used by builder. Payments start immediately but many builders will include the prepaid interest into the loan and pay the bank while its in construction phase. Nice since no payments but if delayed, you will have to make payments once reserves are gone…
Upside here is ownership happens right away, but delays can cost you money…
For hot markets, check out Biloxi MS now…with all the casinos coming, it will get home soon…
biloxi huh??? Have you checked out the market in texas?? I’ve been researching San Antone as a good price per sq ft and $$$ per capita… Property taxes are high, but prices are low with a ton of new builds, i’ve seen prices as low as $30 per sq/ ft???
The reason i like pre construction is the appreciation that builds during the construction period...
Yes I know about texas, and just like you mentioned 4% for property taxes. So the avg 200K home will carry a $8K tax bill… Its a little high. Good thing is in preconstruction you will not see the bill most likely. Now I do not know if they wait 1 full tax season before they reassess the taxes to the purchase price. In Fl you get 1 full yr. The 1st yr its only what the land is worth.
But TX is not as hot as people think for preconstruction, Still a slow job market in many areas which makes it hard. Houses are cheap, under 200K and big… Alot for the buck, but thats for a reason.
I do not know to many investors going to TX for that reason and taxes… Also NC is becoming hot in many areas outside Charlotte but most of that is resale homes as you can get them for 100-150K…Taxes are really cheap. They make great rentals with teaser loans, you can cashflow 500-600 month easy in that market.
Then GA, everyone in FL is running there now. And not just to Atlanta area, but not sure how the preconstructions are going. Look into the areas being rebuilt from Hurricane Rita…Just taking some chances as huirricane season is back…but if you can get a home built where the builder is financing it all and not you, its worth the chance…
I will tell you, in Fl, Mercedes Homes does assignable contracts. Generally 10% down, but sometimes you will see them having a deal with 3 or 5% down… But you will have to call each office to find it…
More and more the deals I’m coming across are builders and investors in full oh sh** mode. I plan on waiting six or eight months, and buying at the height of the panic. There are really only rumblings now.
But each market is different. Real estate market does not operate like the stock market… So each city will react differently, some cities never even saw a 5% increase during the boom…
That’s one of my points exactly. In fact, some markets have been flat or declining for a decade. Detroit depreciated last year-- one of the hottest years for real estate in nearly a century in other markets. (Detroit was down 2% last year)