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Miami, FL, United States, 2006/02/25 - Miami preconstruction has been the center of attention in the press. Lately, there have many predictions about the future of this dynamic market. This article reveals unique perspective from an active Miami Preconstruction investor and realtor..
Miami preconstruction real estate investing is buying properties prior to their construction. For example, a condo that will be built in 2 years, you can put a small deposit to hold the condo and capture the appreciation during the 2 years, which is the time it takes for the condo to be built.
Why is Miami Preconstruction investing attractive to investors?
No carrying costs during the 2 years till the condo is built. There is no mortgage, no taxes, and no expenses at all. Most of all, you do not need to manage tenants which can be a concern for real estate investors. Also, you do not need to qualify for mortgage. So, regardless of your credit history, developers will sell you a unit.
How to calculate your return on Miami preconstruction real estate investing?
If the condo for example priced at $500K, typically, in the Miami market, developer would require 20% deposit. 10% at contract time and additional 10% when construction begins. So, your total out of pocket deposit would be 100K which 20% of 500K.
Miami real estate market has been appreciating over %25 annually. However, for this example, let’s assume Miami real estate will appreciate 20% annually. By the end of the first year, this condo that has not been built yet would have already appreciated from $500K to $600K. Which means you have made $100K on your investing of $100K. That 100% return in one year. In other words, you could double your capital every year.
How to buy Miami Preconstruction?
Be aware to these facts: Developers are NOT Mutual Fund Managers in the business of making you money. They are business people in the business of building real estate. They understand the real estate market and they make the most profit by selling for the highest price. This is the myth that could cause investors not making the right decision.
So, do your own research, the Internet can be a great aid in finding initial information. After doing some initial research, find a good realtor that understands the market and preconstruction to help you evaluate the options you have available.
If you’re contacting the developer directly, you could be taking a gamble since the sales staff has no loyalty to you to disclose vital information, they work for the developer. Go with a knowledgeable local realtor to represent you. You can find realtors to provide this free service. They are paid commission by the developer and your price is the same.
What Miami Preconstruction investing do you choose?
Waterfront real estate is the safest investing possible. Tens of thousands are moving to Miami area every month and most asking for waterfront or oceanfront real estate. They are willing to pay a good premium to enjoy the life style. There is a lot more details that cannot be covered here.
Bubble or Not?
Miami Preconstruction and Miami real estate has been very rewarding to its investors. If you’re looking for long term investing, this is a great vehicle for good ROI with little effort. “Be selective”, Not every developer and every project is well analyzed and priced right. Like many financial markets, Miami Preconstruction and Miami real estate are controlled by greed and fear, the primal emotions that drive the markets.
Interest rates might not have great impact on Miami real estate since Miami is an international market with buyers from around the globe. International buyers are enjoying the extended buying power from the weak US dollar and heavily investing their cash in Miami real estate markets. Florida has very flexible rules towards foreign nationals buying Miami and Florida real estate. Also, we are seeing buyers from markets such as California and New York that are aggressively buying Miami real estate and oceanfront properties.
Savvy and long term investors will do well. Risk management is the key to survival in financial markets and that includes Miami Preconstruction real estate investing.