Preconstruction real estate investments are investments in ‘yet to be completed’ construction projects. Completion may still be six months, a year or two years away; may be even more. An investor is able to put in a small deposit to bookhold a condo or apartment in the project till it is complete. He can then sell the property to capitalize on the price appreciation from the date of investment.
The preconstruction investment is found quite lucrative to most investors on account of its simplicity and low risks. Since the investment is small and has to be made in cash, there are no mortgage related hassles or expenses. There are no taxes involved and the investor just needs to sit tight and keep a watch to see that his investment keeps growing with the appreciation in real estate prices.
Preconstruction investment in Miami is of particular interest on account of the rate of appreciation in property prices over the last few years. It has been observed that the average rate at which real estate prices have been rising annually in Miami has been close to twenty-five percent. In the case of an investment in a constructed house for rental income, there is no need to manage tenants in a preconstruction investment. And the absence of mortgage related issues means that a developer will sell a preconstructed condoapartment unit irrespective of credit history ratings.
On the basis of available figures it is safe to assume that investing $100000 in a $500,000 condo in a preconstruction stage project in Miami can net in $100000 in price appreciation in one year. The down deposit required by the developer in a preconstruction property is around 20%. Therefore a condo priced at $500000 will require a down deposit of $100000; half to be paid at the time of contract and the other half at the beginning of construction. Based on a conservative estimate of 20% annual appreciation in real estate prices as per current trends, the under construction condo would be worth $600000 after one year. This would be a straight 100% annual return for the first year on the investment. Simply stated, the capital invested would double every year.
Preconstruction investment is especially attractive for Miami real estate because of the influx of large number of people into Miami including buyers from outside the US interested in taking advantage of the flexible rules available to foreign nationals who want to purchase Miami real estate. Waterfront property is the most in demand, being preferred by such buyers including those from States like New York and California and others.
Instead of rushing headlong in a preconstruction investment, it is very important to gain detailed information before making the actual investment. This is because every developer or every property is not desirable from the investment angle. A project may not be well analyzed or priced right. Therefore it is best to seek the services of a local realtor to overcome such difficulties while making a selection for the investment. Talking directly to the developer or his staff may not yield objective information.