Southwest Florida Real Estate Investment Analysis
The Investment Opportunity in Preconstruction Purchasing
email Chris Quackenbush, Sand Castle Realty Group or call 239-823-2980
Because of the tremendous influx of buyers, builders were stretched to catch up with demand. Market appreciation rates reflected this imbalance and offered great opportunities for the careful buyer. There are many formats used by developers, but a typical scenario would involve a down payment of 5%, 10% or 20% depending on the price, time until occupancy and other factors. There could be a further down payment at later stages of development, but the total is usually 20% or less.
EXAMPLES
Let's run an example of how this actually works. If you put down 20% on a home of $300,000, that is a deposit of $60,000. If this home is ready in a year, and appreciation is 5% of $300,000, your appreciation is $15,000 before closing or ever taking possession.
If you have a buyer for this property at the time of close, a simultaneous close may be a possibility. Depending on the title and mortgage company practices, a single financing may be required instead of two financings, simplifying the transfer and saving costs. If you do not finance the property yourself, you have made a 25% profit minus the expense of selling and closing. This will have tax implications you should discuss with your tax specialist as it could be taxed as regular income.
HOW TO FIND PRECONSTRUCTION DEALS
In constructing "planned communities", their usual method is to buy a large piece of land and plan to develop and release property in stages. This process can take five to ten years. The earliest stages generally are lower in price because fewer amenities may be built and more risk (or vision) is required for buyers. Each section released is generally higher price and pricing within a "release" changes with time also. For this reason, it is important to have experts keep watch for good properties coming to market well in advance. With high demand, signing up for the opportunity to buy property months in advance is necessary. Contacting Chris Quackenbush is your first step to finding great deals in Southwest Florida.
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