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The Basic of Pre Construction Investing

Aug 17, 2007
Undisputedly the real estate market has large potential for those investors who are interested in generating enormous profits with minimum risks involved. One such aspect of the real estate industry, which is gradually gaining popularity, is pre-construction investing. As the name suggests, it is investing in real estate like vacant plots of land or prospective sites of development. Then, with time, as the real estate property is developed, the market value of the property also appreciates. The basic of the pre-construction investing is that you should be cautious and aware of the market conditions. The trick of the trade is to invest only in emerging markets or markets that are expected to emerge.

Investment in pre-construction sites offers unparallel advantages. Not only do you get an opportunity to buy the real estate at a low price, but later on as the construction progresses, the value also increases. The investor can buy the land according to his affordability, and by the time the development is over, the value appreciates significantly. Investing in the right market is the key element to success in pre construction investment. Not only as the construction takes place, does the property appreciate but even as the construction progresses from one phase to another, appreciation continues.

The unique point about this type of real estate investing is that no mortgage loans are required and hence no payments have to be made by the investor. The sole responsibility of developing the property and financing the construction at the pre construction site lies with the builder and not the investor. By securing pre-construction land at a rebated price and a guaranteed appreciation after the development ends, the investor can be assured of reaping huge profits. Besides this profit, the investor is also the proud owner of a new and fully developed real estate property.

Many real estate investors largely undertake pre construction investment because it is comparatively easy. All you need to do is invest in the right property in the right market, wait for the price to appreciate during the construction and then sell it at the best possible market value. You dont need to face other related issues that are generally associated with other types of real estate investments.

Since you are dealing with a brand new property, you dont need to be concerned about other problems like fixing or making major repairs. Investors are also easily convinced of making pre-construction investment because once the construction is over, you also have the option of renting or leasing it while you can also repay the mortgage. The fact that you are earning income from the rent and at the same time paying off your debt, while you are still in possession of your property whose development has been financed by someone else makes it all the more appealing. Thus, it is advisable to have some pre-construction investments along with other real estate investments, as a part of the business.

Although the pros of pre-construction investment certainly outweigh the cons, an investor still needs to consider the drawbacks of the business before making any investments. Due to the steadily increasing popularity of this type of investment, developers have started demanding a higher down payment. An investor needs to have the foresight to find the appropriate pre-construction site, which will yield maximum profit after development. As an investor, you need to take cautious steps to minimize the risks and maximize your profits. To accomplish this, you need to do satisfactory research so that you dont end up with a raw deal.

With the appropriate insight and investment in the right emerging market, pre-construction investment offers tremendous scope for growth and profit maximization.
About the Author
Real Estate Investing is made easy with Real Net USA. Our four step program of find, fund fix and sell, is your blueprint to Real Estate Investment success. Discover how you can profit at http://www.realnetusa.com.
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