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Many people consider an investment in pre-construction condominiums an excellent investment opportunity. As contrasted to re-sales, you have a brand new property with all of the attendant warranties. Some people make this type of purchase because they have no immediate need to occupy the premises. In all cases, delivery of the property will months to years away, and frequently more in the case of condominiums.
The standard procedure for purchasing a Pre-construction unit is to secure your condo with a deposit. The contract is typically signed before construction is complete.
> The Process
Typically, a minimal refundable deposit will secure a reservation in the initial stages of pre-construction.
When a buyer decides to move forward, the remainder of a percentage of the purchase price, normally 10% - 20% is due to bind the contract.
After construction begins, developers often schedule incremental price increases with the release of each new phase.
With buyers aware of increasing prices, demand tends to increase dramatically, which in turn lends itself to maximum appreciation opportunities.
Probable build out time ranges from 12-24 months, which affords buyers huge potential benefits in rising appreciation, and tremendous savings when purchasing early in the process.
You do not need to qualify for a mortgage. There are no financial contingencies in the contract. The hope is to capture on appreciation as the market goes up without having to pay (carrying costs) mortgages, taxes, interest and the other expenses that you deal with if you own typical real estate investment. This has been the dream of many real estate investors in the past that had been burned out dealing with difficult tenants, finding tenants, increased property taxes and the many issues you face when you start investing in real estate.
> How much cash do you need?
At FRG INTERNATIONAL REALTY we only deal with large, reputable developers and the majority require 20% down payments 10% with contract, then another 10% later.
Developers do not qualify Pre-construction buyers. So, your credit history, income, monthly expenses...are not considered. As long as you have cash they will sell you preconstruction.
Buying into pre-construction has risks. All contracts favor the developer. The developer is NOT liable for expenses you incur if the product is not delivered on the due date. A developer's financial difficulties can delay occupancy while his project is re-financed, liquidated, or sold. The developer keeps your deposit(s) if you are unwilling or unable to make up the difference between the contract price and the appraised value. There is a high probability you most likely have lost your deposit if the developer goes into bankruptcy. You are forced to close when the contract calls for a close usually upon the CO being obtained. In the case of a condominium this almost always means before the building is totally complete; i.e., lobbies are still under construction, elevators are still being used for construction purposes, landscaping is incomplete, etc. In other words, the governing municipality granting the CO considers the building safe for occupancy regardless of inconveniences to the occupants.
Still preconstruction attracts smart money and delivers high returns with no effort required except wiring money to an escrow account where your money is protected.
Some developers will allow to flip (assign) your contract before you need to close on the unit.
WE believe if you BUY RIGHT, you can be ahead of the crowd and limit your risk.
> Keep in mind:
Not every realtor understands preconstruction. Preconstruction is not the traditional investment vehicle and has different dynamics. Working with an experienced pre-construction broker usually makes the difference between SUCCESS AND FAILURE.
You'll need your broker to look after your investment. Pre-construction investment holding time can be up to a few years. You need your realtor on your side and accessible. It will make you sleep better at night.
We'll advice you when you buy, consult you when it's time to sell Remember, you make money when you sell.
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FRG INTERNATIONAL REALTY
1000 South Pointe Drive, ATH8
Miami Beach, Florida 33139
3801 Collins Avenue, L2
Miami Beach, Florida 33140
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