Preconstruction Investment
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Investing in real estate has long been known as one of the safer places to put your money. In our present economy, resort real estate, especially water or oceanfront resorts are the hottest commodity around.
Preconstruction Offers Even Lower Prices
When a developer plans to build a resort, one of the first hurdles he will need to overcome is the financing. Financial backers and banks want to know there is an interest in the project, and in most cases will require the developer to have reservations and deposits on a certain percentage of units before the financing is approved.
For the prospective real estate investor, this means the developer will usually offer a considerable deal for the "pre-sale" buyer in order to secure financing for the project.
Early Appreciation
Usually these initial preconstruction prices for condos will be lower for the first purchasers than it will be offered after the project is secured. Typically, the developer will ask the investor for a deposit of "earnest money" that is placed in an escrow account, and used as proof to the bank that the units will be sold. This deposit is often around $5000 to $10,000. This initial reservation fee is kept safely in the escrow account, and cannot be used or lost to the buyer.
The initial or first "phase" of the resort is typically sold at a deep discount, and to encourage further price increases a developer may plan increases at
scheduled intervals throughout the second and subsequent phases.
This encourages investors to buy condos early because prices are increasing,
and it works well. As buyers see the price of the properties going up, they want to benefit from the increases. This creates more demand, and thus will usually increase the value of the preconstruction investment condos or real estate.
Several buildings may be built, sold, and then more follow. The best opportunities have almost always been in buying the earliest condos, while the subsequent buildings lose this i nitial investment incentive. The older the project, the more this savings will usually decrease.
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Property values in resort areas and for waterfront properties have increased
nearly 15-20 percent a year for the last 5 years, according to various sources and census bureaus. In today's market, this constant appreciation adds even more to the potential equity.