Preconstruction Investments

Investing in real estate has long been known as one of the safer places to put your money.   In our present economy, resort real estate, especially water or oceanfront resorts are the hottest commodity around.  Florida has always been a favorite, to the point that prices have become nearly out of reach except for the very wealthy.   Investors are now discovering that Myrtle Beach, SC and even the North Carolina beaches are a great alternative. Preconstruction Offers Even Lower Prices When a developer plans to build a resort, one of the first hurdles he will need to overcome is the financing.   Financial backers and banks want to know there is an interest in the project, and in most cases will require the developer to have reservations and deposits on a certain percentage of units before the financing is approved. For the prospective real estate investor, this means the developer will usually offer a considerable deal for the "pre-sale" buyer in order to secure financing for the project. Early Appreciation Usually these initial preconstruction prices for condos will be lower for the first purchasers than it will be offered after the project is secured.  Typically, the developer will ask the investor for a deposit of "earnest money" that is placed in an escrow account, and used as proof to the bank that the units will be sold.   Although sometimes much higher in the Florida resorts, in Myrtle Beach, this deposit is often around $5000 to $10,000.  This initial reservation fee is kept safely in the escrow account, and cannot be used or lost to the buyer. The initial or first "phase" of the resort is typically sold at a deep discount, and to encourage further price increases a developer may plan increases at scheduled intervals throughout the second and subsequent phases. This encourages investors to buy condos early because prices are increasing, and it works well.   As buyers see the price of the properties going up, they want to benefit from the increases.   This creates more demand, and thus will usually increase the value of the preconstruction investment condos or real estate. Several buildings may be built, sold, and then more follow.   The best opportunities have almost always been in buying the earliest condos, while the subsequent buildings lose this initial investment incentive.  The older the project, the more this savings will usually decrease. Property values in resort areas and for waterfront properties have increased nearly 15-20 percent a year for the last 5 years, according to various sources and census bureaus.   In today's market, this constant appreciation adds even more to the potential equity. The Boomer Phenomenon Resort and waterfront/oceanfront property has always been in demand. As the many "Baby Boomers" start to retire and have money available to fulfill their dreams of owning oceanfront or beach property, the demand increases even as land becomes more scarce and the supply nears its end.   The time for buying Myrtle Beach investment real estate is NOW...while prices are still reasonable and the choices are not so limited. The Preconstruction Process After the developer has around 80% of the first part of his resort reserved, the banks will approve financing, and the next stage begins.   This can be a few weeks or months. Typically in Myrtle Beach, inital ground breaking occurs quickly.  At this time, the buyers are expected to bring 10% of the buying price to the table, and to be pre-qualified themselves to finance their unit. (Often in other areas this amount is closer to 20%!) Though it is up to the developer, some projects allow the condos to be "flipped", or sold on paper even before the project is built, and this is where large profits have been realized.   Flipping is something that some Myrtle Beach projects still offer, when places like Las Vegas and the high-priced Florida resort areas no longer allow it. It often works out that the reservation can be "sold" on paper even as the project is being built, and the new buyer can then be required to put up the 10% deposit, freeing up the first buyer's cash.   Any extra profit is still not realized until closing, however. This is not guaranteed, agents are never allowed to promise any kind of investment profit, and it is always at the discretion of the developer if flipping will be allowed, but it often is, and this is one of the biggest reasons why Myrtle Beach and the Grand Strand are such a popular area for investing in new construction! Article by Jan Chilton, Myrtle Beach Web Design.