The Key Ingredient To Increase Preconstruction Profits By Over $20,000
One of the greatest preconstruction investing issues that I hear from individual investors is that they can’t get access to what they believe are good projects. Regardless if the preconstruction project is a beach condo, a townhouse, a single family home, or even land investment, individuals are finding that many restrictions are being placed on them by developers. In addition, prices are continuing to runaway. So given all this, how is an individual investor supposed to excel in this environment? Read on and find out! Suppose the investor had the ability to march right into the developer’s office and demand that they should give you at least a $20,000 discount, which now would turn a good project to a really great one. I mean, you’re serious about your preconstruction investing. Shouldn’t you be entitled to that discount? After the developer stopped laughing, they probably would suggest the investor find a path to their door.
If you look at this from the developer’s perspective, they probably already have a marketing team in place to provide a steady supply of purchasers or investors. In this market, a single individual preconstruction purchaser/investor would have absolutely zero impact on anything the developer was doing or planning. Basically your request for a discount provides zero advantage in the preconstruction process.
So let’s change this picture a little bit. Suppose you are a surgeon and you walk in with 15 other doctors and tell the developer that you are very serious about this preconstruction project and probably others that the developer has on the drawing boards. Ok, this is possibly a horse of an entirely different color for the investor group. Having a single group come in and moving a block of 15 units in one fell swoop may be something of interest to the developer. This is especially true if the developer has time pressures to get this preconstruction project moving forward.
In this real estate environment, with lots of investors, it may (or may not) be possible for this group to get a discount but there may be several other ways that this developer might chose to help the group. For example, the developer could assure the group that they will definitely be able to get 15 units in the preconstruction project; for many locales, even that is a major feat. In addition, the developer could assure this group that they may get first crack at another phase, or another project altogether. If the developer is wise, they will find some way to work with this group and treat them well.
In this new preconstruction project, the developer has agreed to provide a $15/Sqft discount if 20 investors make their reservations in a short period of time. For a 2 Bdrm, that is a discount over current selling prices of $21,570!! Simply because 20 people made the effort to work together on a preconstruction investment of mutual interest. In addition, this is great for the developer because with that number of new preconstruction reservations in place, it helps them accomplish their goals more quickly. This is an example of the proverbial win-win situation.
So how can you take advantage of group buying power in your next investment, regardless if it is preconstruction or another type? First, you have to find a place where other like minded people visit. Possibly this is a local real estate club, a group of co-workers that like to invest together, participants in an on-line forum, or even as part of groups like ours. Regardless of how you accomplish the goal, think in terms of how you can best put together your team and increase your buying and negotiating power.
Slaughter of the housing speculators.
Just another view on what could happen with pre construction investing.
http://www.kitco.com/ind/benson/aug182005.html
John $Cash$ Locke
Pretty scarey, but certainly plausible. This author makes a good case for going back to the stock market and shorting the homebuilders and sub prime lenders.
Thanks for posting the link, John.
That was very insightful.
That paints a very scary picture for the beginner! It really depends on your locale...
I reiterate earlier post where I mention that most of the people that I know who have lost money in this venue over the last several years have done so in pre-construction investing..