What is Pre-Construction Investing?

The topic of pre-construction investing has rapidly gained popularity in our real estate investing community. The reason it has gained such popularity is because pre-construction investing offers some unique advantages that other types of real estate investing simply can not offer.

Pre-construction investing is exactly what is sounds like…locking up a property when it is pre-construction. In other words…the property has not been built yet. Currently the parcel of property is nothing more than a piece of vacant land. Then, over the next 12 to 24 months, the piece of real estate is constructed. During that period of time, there are things that happen. It is these unique occurrences that make pre-construction investing so desirable. The thing that makes pre-construction the greatest of all, is when it is done in the emerging market. I invest only in the emerging markets. More on that in a moment.

When a Property Is Pre-Construction, It Comes at a Lower Price

The very first thing that happens is that a pre-construction investor is able to lock-in the price on his property at a price that is lower than what the price will be after construction has been completed. As a development gets completed, the prices continue to increase from one phase to another.

During the Build Cycle, Appreciation Increases Value

In addition to our price increase on the front end, values also increase in another way. I only invest in two types of markets, (1) A market that is currently appreciating, (2) A market that will soon be appreciating. By only investing in the right markets, I have added an additional profit center to my investing…appreciation. While the property is being built, it is also appreciating in value.

No Payments Are Required During the Build Cycle

When a property is pre-construction, in many cases no mortgage is required. And if no mortgage is required, you got it…no payments are required. The construction is being completed with the developer’s financing. You would not need to obtain a mortgage until the property is completed, and if you want to hold the property long term. Many pre-construction investors sell their property before that point, and do not need to qualify for a mortgage at all.

When the Property Is Completed, We Have Locked-In Equity, and Also a Piece of Brand-New Construction

By obtaining a discounted price on the front end, and also appreciation during the build cycle, we have set ourselves up for success. By the time the project is completed we have obtained an equity position that allows us to profit as an investor. We also have the type of real estate that is easiest to sell…a piece of brand new construction. This further expedites our exit strategy.

As you can see, pre-construction investing offers some significant advantages that other types of real estate investing simply can’t offer. This is why so many real estate investors have one or two pre-construction properties churning away in the background while they also do their other types of real estate investing.

When pre-construction done in the emerging market, it is phenomenal way to invest in real estate. The emerging market is a market that is getting ready to appreciate, because of very specific factors that are getting ready to play out in the market. During our meeting with your group I will be discussing how I find these emerging markets and why they are such a powerful investment play. See you then!