The Construction Market

The Construction Market

Here you’ll find a collection of valuable information to help you get started. If you have a question, feel free to write me. The new Construction market is exciting.  If you think this area is just for retirement, think again.  Fashion and Film industry in South Beach.  Many technologies and pharmaceutical companies have located their operations here.  Several large international financial institutions have their offices in Miami.  Thus bringing many young professionals here with the population growing every day.  Of course, we have had an influx of educated and wealthy people relocating to South Florida from Latin America, the

Caribbean, Europe, and the US to enjoy our beautiful sunshine, ocean, and lifestyle at affordable prices. They come here and they want new homes I believe if you buy right you can be ahead of the crowd and limit your risk. So, this site will attempt to give you that edge.  This site will help you with your decision to find the opportunity in the right area, with the right developer, and most of all ” the right price”.Developers faced with many challenges when starting a new development.  They have to prove to the lender (financing their project) that there is enough demand for their project.  In fact, most lenders require that the developer sell a certain percentage of the project before the lender approves the project.  As a result, the developer has to entice buyers to buy early by providing special discounts to early buyers.

Typically, you reserve a unit by placing a deposit depending on the project with the title company to hold a particular condo. In each stage of the construction, the developer would raise prices in most cases this encourages people to buy early because prices are going up, and it is self-serving prophecy buyers see the price of the unit going up, they want to get in on the increases, it creates more demand and indeed may increase values of the pre-construction units.

In a very dynamic real estate market like the South Florida market, this practice started a new kind of investment referred to as “PreConstruction Investing” or sometimes called “Flipping”. PreConstruction How to calculate your return One Investment Example: high returns and limited risks Let’s consider apartment reserved pre-construction. Closing is due in years. The initial investment is of pre-construction a conservative appreciation per year for a new building in Miami, an investor can resale his unit if he sells right before the closing date.  value appreciation per year After a commission to selling broker to deduct from his capital gain), net profit is Worst case scenario: an investor cannot resale his unit before closing.

Then he goes to closing with easy access to financing when has been put down and has all the time he needs to resell a new unit at a price locked in 2 years before in a market that has appreciated in the meanwhile. In this case, he would have incurred an average additional in closing costs at closing and a few months of mortgage payments. So if he sells at Pre-construction investment principles – step by step

Most people are aware of significant income potential via investment real estate rental and appreciation, but many people believe that significant investment property appreciation can only be realized over a long term period. Investing in preconstruction projects offers investors the opportunity to purchase a property below market price and realize significant investment appreciation upon completion of construction. Such opportunities are most widely available for large scale real estate developments such as condominium complexes.

This is how it works:

1. Reservation Phase: In order to obtain financing, developers must prove that a demand exists for the proposed project. They create architectural renderings and floor plans and begin to presell units at a greatly reduced proposed price. Prospective buyers hold a “reservation” on a particular unit with a token down payment, often which is placed in an interest-bearing escrow account. The “Reservation Agreement” is revocable at any time for any reason and upon written notice of cancellation, the investor receives a full refund.

2. Contract Phase: Once the developer has the required number of presale reservation agreements,” condo docs” are recorded with the county, and reservation holders are sent a copy of the docs along with “hard-contracts” which require a down payment which can generally be made by a letter of credit issued by your bank you are looking to make a quick profit, you should be sure that the contract that you are about to sign is “assignable”. This means that you can often assign or sell your rights (at a profit) before you go to closing. Florida law requires that prospective buyers of new condominium developments are given a 15 day rescission period after signing the “hard-contract” but after the rescission period, the hard-contract is a legally binding sales contract.

3. Construction Phase: Construction can take from 6 months to years. Your contract will have an expiration date upon which you are entitled to a refund of any deposits if the developer has not completed construction. Once you’ve gone to a hard contract, no additional money is required, except for upgrades until completion of your unit. During this period, you will most likely see several sales price increases as completion nears. This is how you can make a profit by assigning your contract before you actually own the unit.

Suppose you reserved the unit construction. 3 months after construction, developer prices for the same unit are raised to months after construction, the developer raises the price again to At any point, you can resell your rights to the unit and upon closing, realize the same gains as the developer Closing Phase: Once construction is complete and if you have not assigned the contract, you will be expected to close on the unit. If you don’t, you forfeit your down payment. For this reason, it’s advisable to locate a lender and get pre-qualified prior to the completion of your unit.  Closing proceeds much like any other real estate purchase. Additional expenses such as association fees, etc, are disclosed in a “good faith estimate”.

At closing, depending on your choice in markets, you can actually leave the table owning a condo with significant equity and some money in your pocket. Let’s assume the unit above is now priced at completion. You put down upon hard contract (either by cash or letter of credit). At closing your lender appraises the property and will lend you only owe about as stated above so you receive interest on your down payment.

PreConstruction – Do I make money if I only buy on Day One

There is an appreciation in each stage.  For each stage, you can make a profit.  So, the earlier you buy the higher the profit.  However, if you missed day one do not write off the opportunity.  There is an increase when you go to contract, another when they break ground, and typically when the percentage of the building has been sold.  So, I found that you could see appreciation every month as the closing time approaches.PreConstruction – How to Sell Flip How do you sell your condo To Selling the condo prior to having to close on it, you have two choices:

If the developer contract allows you to assign the unit, then you can assign the contract.  However, keep in mind that in some cases the developer charges a minimal fee (assignment fee) for that service since they have to change their paperwork for the new buyer. If the developer contract does not allow you to assign the unit, you have two options (Call me for details on the first one) or double closing is two simultaneous closings, one where the title is transferred to you from the developer, and the other one where you transfer the title to the new buyer.

PreConstruction – Costly mistakes and how to avoid them?

I have done a lot of research and have been thru several PreConstruction investments and I found that Waterfront New Constructions have appreciated far more superior in comparison to other developments.  Of course, South Florida is facing a shortage of waterfront land to build this among other factors provided PreConstruction Investors in Waterfront construction very rewarding returns with limited risk. Ensure your view is protected.  Can you imagine buying your condo with a breathtaking water view to find out sometime later that another developer is building and will block your Waterview?  You’ll lose a lot.  This will require the expertise of an experienced local realtor that is familiar with new construction plans, zoning, and city regulations to give you this edge.

 As a developer, engineer, PreConstruction investor, and experienced realtor myself, I worked with large developers, the local city, and zoning offices and can provide this critical information. Be prepared to close if you have to.  If you can’t close, you can lose your deposit.  There are no financing contingencies in the contract. Get an experienced realtor to do the right research.  Look at the Final Check List for details. Have the right team on your side.  You need a realtor, lender, and real estate attorney that is experienced with PreConstruction investments and flipping.  I can provide you with the right team to ensure a smooth transaction. PreConstruction –

FINAL CHECKLIST (GO/ NO GO DECISION)

You could go directly to the developer of this or any other new construction project.  But a developer has only one product to sell you.  You can ask me about all of them and pick the one that best suits your needs.
Here is the information you need Price Range Analysis What price ranges are available, what areas, what build times, etc. Days On The Market & Sold Analysis What is selling and how long does it take to sell new homes, inventory analysis, holding costs, etc. Appreciation Analysis How much is the appreciation based on area, type of home, price range, etc. Builder Incentive Analysis What are the builder incentives – based on area, type of home, price range, etc. Builder Options Analysis

What options to include & exclude from a new construction investment I could provide the above information in addition to will share insights and information you won’t get from anyone developer.  I’ll save you the time it would take to talk to them all, and help you make objective comparisons as you decide with confidence which new construction project is right for you. In other words, I will give you all the facts and comparisons, instead of a sales pitch for one project. The bottom line:  Working with me means your interests are represented by your realtor, with no difference in price.

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