Pre selling homes or condos at a discounted rate to raise capital is what developers do. This may look like a good deal considering that these properties are sold at a lower price before their completion compared to the cost when completed. However getting into a business like this bears its own risks. To avoid associated perils, lean back and read on.
Know the Rules
Start by finding out if there are limitations that will prevent you from selling your pre construction home within a year of construction completion before investing in a pre-construction property. Superior Realty Point offers access to the absolutes lowest price when looking to acquire a property in Toronto
The reason is obvious; developers don’t want to compete with you when trying to sell their units they previously sold to you at a discounted rate. So these rules are put in place to restrict the sales price or your ability to sell within particular duration of time.
You can opt to use the property as a rental unit if the developer hinders you from selling after completion of the project. And while the property appreciates in value it affords you the opportunity of raising a rental income and blankets carrying charge.
Using your rental income you could consider giving oversight functions such as maintenance and other tenant related issues to a property management firm. Note that certain properties have limitations on renting out units to other tenants; therefore familiarize yourself with these rules before venturing into rental income. Who said being a landlord was easy?
Buy the Smallest or Least Expensive Unit
The allure of purchasing that large space may seem wise but the return on investment may not be worth it. Look at things from the perspective of an investor and overcome the mistake of buying based on feelings or personal preferences.
Normally, the simple or cheapest house or unit in a structure or residential district most often appreciates at the quickest rate and offer the best return on investment.
Be Careful in a Slow Market
If you discover that the real estate market is slow, you could end up trying to sell your property for a price that’s higher than what builders are proposing and this may affect you. If after construction the developer has difficulties selling units they may be forced to cut down the price and consequently undersell you as your competition. However, you may end up cutting down your own selling price and really losing on the deal or profiting less than you anticipated.
Watch Out for Wholesale Pre-construction Investment Deals
Wholesale pre-construction investment deals work when a block of units is bought from developers at a discounted rate by bringing a large number of investors interested in purchasing.
Professional service is offered with due diligence by most wholesale investment firms, but beware that certain firms can’t be trusted. Whatever your interest in preconstruction investing, be educated and informed on the risks you may encounter in the market and how to overcome them. Be firm in your resolve as this is a remunerative venture.