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Benefits of Preconstruction Investing.
Why this time tested process is investor friendly.
By Steve Presley ~ Principal, Price Morgan
There are many benefits associated with preconstruction real estate for investors who are considering is as an investment strategy. Over the years I have personally experienced the benefits and have watched as others have as well. Now it may be your turn to consider what preconstruction real estate investing can do for you.
Time.
Time is a friend to preconstruction. When you consider the general upward direction of real estate values over a given time you can clearly see why investors like preconstruction. Think of it this way, you get all the benefits of appreciating homes or condos during the construction time without the expenses of owning the real estate. This is the concept of controlling real estate without the hassles of owning real estate.
Leverage.
Leverage is always a friend to real estate investing. With preconstruction real estate your investment dollars are working five to ten times. In a typical preconstruction opportunity you will have about 10% cash invested during the construction period. If appreciation is 10% per year your cash on cash return on investment is one hundred percent. For example, a $500,000 property can be controlled with $50,000 cash. If that property appreciates 10% then your property is now worth $550,000. That's 100% return on your preconstruction investment. If you where to put $50,000 in a savings account at 10% your return would only be 10%. This is the power of leverage with preconstruction real estate investing.
7 No's of Preconstruction.
Unlike traditional investment real estate, preconstuction real estate investing offers advantages not found in fixer-up or landlord properties. If you can imagine for a moment owning real estate where you have no tenants and none of the hassles associated with tenants.
Here then are the 7 No's of preconstruction real estate investing. No tenants, No repairs, No maintenance, No monthly payments, No HOA dues, No taxes and No insurance.
Preconstruction Summary.
By investing in preconstruction real estate, it’s possible for an individual to
control a $500,000 property with just $50,000 over a 2 year period. There simply aren’t many comparable
strategies that allow this much leverage with such low exposure. And even though it’s a condominium,
there are no out-of-pocket expenses during construction. No HOA dues. No maintenance fees. No property
taxes. It’s just that simple. And it’s not hard to see why so many investors are catching on.
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