Articles
Pros & Cons in Pre- Construction Real Estate Investing
Aug 28, 2006 - 4:29:00 PM

Pros

• It’s the Easiest Form of Real Estate Investing - Investing in pre construction real estate is the easiest form of real estate investing, all you need to do is buy a property wait a few months for it to get into a higher phase of construction then sell it for a profit.
  
• No Head Aches - Pre construction real estate doesn’t have nearly the number of problems/headaches as traditional fixer upper real estate investments. With fixer upper real estate you have to worry about a furnace going, re-paving a driveway, insect infestation, or a whole world of other problems. Pre construction investment real estate is brand new out of the box housing, there are no major problems that commonly accompany older houses.
  
• Free Vacations - Buying pre construction investment real estate in Turks & Caicos or Bahamas means you have a free vacation house when the family goes on vacation. Fixer uppers are usually close to your home for easily access and typically not a place your family wants to vacation too. Most people do not have the luxury of buying a fixer upper house halfway across the country and flying down every weekend to work on it.
  
• Rental Income - Rental income is a huge factor for many pre construction real estate investors. The fact that once the condo or townhouse is built and they can rent it out for more money then they pay a month is very appealing. Think about it, if you receive $2000 a month in rental income and you only pay $1300 for your mortgage and upkeep AND your house is skyrocketing in value... Is that a good investment?

Cons

• You Need Money to Make Money - Because pre construction investment real estate is so sought after developers are demanding a higher percent for down payment. Often times developers want 10-20% of the property sale price as a down payment, also just to hold your spot (a reservation) often requires between $2000-5000.
  
• Not Every Project is a Winner - The biggest downside to investing in pre construction real estate is with so many projects popping up it’s hard to find the most profitable investment. Although at the current time most pre construction investments will make you money it’s important to do your due diligence and research the developer AND the management company.
  
• Money for Nothing - One reason that some people stray from pre construction investment real estate is the simple fact that they do not feel comfortable buying a property that they cannot see the finished product. Remember, when you’re going to buy pre construction investment real estate it usually hasn’t even been started yet. This tends to scare amateur investors because spending that much money for them is usually an emotional buy, the seasoned investor understands that the reason they are getting the price they are is because it’s in the pre development stage. If the property was already finished the price would be more. I hope these basic Pre Construction Investment Real Estate Pros and Cons help you to make smart investments in the future.