Here are a few benefits and tips for buying pre-construction.
In today’s real estate environment, many houses receive multiple offers and end up selling for more than their asking prices. These conditions make pre-construction homes a viable option for you. Today I’ll discuss some of the benefits of going this route, whether you’re an investor or a regular buyer:
1. The deposit structure is extended. If you were to buy an investment property right now, you’d need to put at least 20% down. However, if you’re buying a pre-construction home, there’s likely an extended deposit structure wherein you still put 20% but do so in chunks at different stages of the process. For example, you might put 5% down in the first 30 days, another 5% after four months, another 5% after the first year, and the final installment after the first 2 years. This structure makes the purchase more affordable for those concerned about putting 20% down all at once.
2. Pre-construction comes with built-in appreciation. In the pre-selling market, as the number of sales goes up, the prices of those units also go up. For example, when a project is only 20% to 30% pre-sold, your unit might be worth $400,000. As it approaches the 50% to 60% mark, it might already be worth $450,000. Another way you can get built-in equity is from the general appreciation of the market. Suppose you locked down a pre-construction contract in 2022; it won’t be delivered until 2025, meaning that the price of that home will rise with the market in the meantime.
3. There aren’t any bidding wars. You won’t have to compete with multiple other buyers in the market—the price you see is the price you’ll pay for the home.
If you are looking to invest in pre-construction, here are a few tips to help you maximize your investment:
1. Look for a well-established builder or developer. You don’t want your home to be their first project, so be sure to do your research and find a builder with a solid reputation.
2. Find a great location. A good location will help you in the long run since it will boost your appreciation over time.
3. Find a project with an assignable contract. That means you could exit the contract by selling it to someone else before it closes. It also allows to you keep your deposit if you don’t close on the property.
If you have any questions about buying pre-construction or anything else to do with real estate, don’t hesitate to reach out to me by phone or email. Hope to hear from you soon!
