We like to point out to our clients the benefits of entering the condo market when the cost to them is the lowest...And their profits are at the peak of their potential. The direction we point to? Preconstruction condo properties.
What is a Preconstruction Project?
Because developers need financing to satisfy their lenders and because they need assurances that their planned building project will, in fact, attract investor-owners, they are willing to offer buyers a chance to reserve a unit even before construction begins. This preconstruction purchase not only helps the developer, it is also attractive to potential buyers. Why? Appreciation of the value of the units is realized by the purchaser.
As a purchaser, you can generally reserve the property with a 10 to 20 percent deposit and at a later phase sell the property for a profit.
Or you may wish to leverage this sometimes sizeable asset with what so far has amounted to only a small amount of capital. In this way, you may benefit from the equity that is growing as the unit appreciates in value, using it as a springboard to other investments.
You will want to know what projects are currently in the planning stages. And you’ll want to be sure that the developer has a longstanding, sound project history. That’s where we can begin to help.
First, condoideas helps you find a preconstruction offering. Then we help you reserve the unit, which you do with a fully refundable deposit (usually 5% or 10% of the unit value), and we help you complete a reservation agreement.
Usually within about three months of garnering the required number of reservation agreements, the developer creates a hard contract that documents the legal and technical details of the new building project. This is when you may be required to complete the initial contract price.
Another 10% of the deposit is required when ground is broken for the project. Be patient. You may wait up to two years to see your unit completed.
Closing the Deal
By this time, buyers have already deposited 20% of the preconstruction price. When the building phase is completed, the additional 80% of the price is due. Whether as a mortgage or as cash, this amount must be available. Other costs to consider are the closing costs and the real estate fees in the state where the development is located.