Nobody takes up investing for the purpose of losing money. Generating profits, the bigger the better, is always the goal. However, for any type of investing there are strategies that will almost guarantee poor results and other strategies that will give you the best chance of making money. Here are some simple but powerful strategies that will help you maximize the profit from your preconstruction investment.
You should decide on your investment criteria before getting involved. What kind of properties are you interested in? What is your preferred return period? How much money can you invest without risking your home or your financial future? All these criteria are personal and specific to your circumstances.
Learn what questions to ask about the prospective investment. What is the state of the local market for buyers and renters? Are there any restrictions on the sale that will reduce your ability to profit?
Establish a clear formula to determine the amount of reward relative to the risk. Is the investment right for your personal goals? A deal that makes sense to another investor may not be a smart investment for you. When in doubt, say no. There will always be other opportunities.
Understanding how to evaluate an investment is a skill that takes time to develop. If possible, seek out a mentor who is successful in preconstruction investment and can show you how to weigh all the factors, including some that may not have occurred to you.
One last point about investing smart – invest where the prime real estate is. Not every location has the right market conditions for profitable preconstruction investing. If there are no worthy investments in your vicinity, look elsewhere.
Get in Early
Timing is everything. Try to get in on the preconstruction deal on or before the first day of sale to the public. Early involvement can let you take advantage of extra incentives and lower prices. In fact, the developer may plan price increases during the preconstruction selling period, so waiting will cost you.
Part of getting in early is learning about potential deals early. Network with other investors. Get on the notification lists of brokers and developers so you’re the first to hear about upcoming projects.
Another aspect of getting in early is the ability to rapidly pick out the best investments, make a decision, and then follow through all the necessary steps without delay. The best deals may not allow you the luxury of time to ponder. This goes back to the point about investing smart. If you can evaluate an investment quickly, you can act quickly.
Work as a Team
Working with a group of like-minded investors can be the best way to gather information about investments. There are many questions to ask and a large amount of data to put together, so dividing up the workload can make things easier for everyone. A group also brings together more buying power. This may give all of you access to better investment opportunities. As a single investor you probably won’t merit any special treatment from the developer. However, if you and 15-20 other serious investors state an interest and ask the developer for concessions, you may very well get them.
Clearly, developing strategies to maximize your investment return is a far better option than throwing money into random real estate projects and hoping for the best. Make it a point to learn the strategies used by experts in preconstruction investing. Then apply them to your own investment activity and watch your profits grow.