Hi Demi,

I really want to get into buying pre-construction condos. How is it that these huge buildings sell so fast? And how do people find them before construction even starts?

It seems I’m always behind the “eight-ball” (so-to-speak).  The ground floor opportunities get swept up and all I have a chance to buy are the pre-construction re-sales. Why would I buy a re-sale unit that some guy never as much as lived in or got a mortgage for but wants me to pay him more than he paid for the unit?!    I just detest the thought of buying from someone that's just selling to make money on me?  I'm thinking, it's better to wait until a new building opens up and take my chances at getting one of those.  Am I missing something?        

Cordially,

Richard B.  (Atlanta, Ga.)

Dear Richard,

You've brought up several interesting points.

"As Consumers" we just don't want to pay more than the other guy. I felt the same way a couple of years ago.  Then~ I learned from the buyers that you don't throw the baby out with the bath water." Let's look at this outside of "condo-terms".

Let's say a Jaguar dealership was selling 2005 Jaguar’s for $100,000.  The dealership decided in 2005 they wanted to develop a ‘Premier 2007 Jaguar’. And for the sake of this illustration, the Jaguar dealership needed enough orders for this new limited '2007' line- to justify the new production. 

In an effort to get  pre-orders with a 20% deposit ($20,000) 2 years in advance,  the car was offered for the current selling price of $100,000.  Quite naturally, the dealership would first offer this to their current clients, client's friends and referrals  as well as their own friends and family. Some people who just happen to call or walk in at the right time would have the opportunity.  However, most of the presales would be sold to the dedicated buyers who could and would make fast decisions.

Hypothetically, it’s now 2007. The cost to produce this car has been increased by inflation, government guidelines, electronically advanced features,  the premier design. The 2005 price for the newest model Jaguar would be history!

Once this sweet car gets to the showroom, and the public's demand and desire is achieved by having the luxury of seeing, smelling, touching and driving it, the value will be even greater! The price could be as much as 35% higher than 2005. The New 2007 Jaguar’s cost is now $135,000. Since most of these were pre-sold, getting one of these at all would be a real find.

Now, if you were in the market for a New 2007 Jaguar-(Brand new! Never driven! )~~would it be better for you to:

1.Get the keys from one of those pre-sold by paying $119,900 ??

This gives you about a $15,000 break ~ Making you happy!

Plus the first buyer makes 100% gain on their $20,000. Makes them happy!

2.Or you could pay $135,000 for the same product-(if you find one available.)

3. Or Pay a deposit for the pre-orders of the 2009 edition for $135,000 or more?

Bringing it home to Condo Re-Sales.

Yes, it's always great to get in on the ground floor. But remember, with real estate, the ground floor is "right here -right now". If you’re really serious about buying pre-construction condos, the time is never better than now.

If a new condo opens today- the ground floor opportunity will be today's prices. Typically, the ONLY way to find any portion of  yesterday's prices is to find someone who bought yesterday.  Some of those sellers are willing to leave enough money on the table to make it beneficial for YOU and for THEM. 

Here's a saying I've heard over and over again from some of 'the most successful investors' in the business: ( And if you're going to get into buying and selling pre-construction condos....Remember this :

"Pigs get fat....but Hogs get slaughtered."

The experienced pre-construction investor buys several units with the intention of selling a few BEFORE they close. If they don't sell some and can't close~ they lose.( And the developer can then re-sell it for the current market price.)

In Summary- * RE-SALE Condos could be your absolute BEST BET.  Weigh all your options.

*If you’re looking for a unit that won’t be built for 18-24 months, then it’s better to locate a unit being sold through the developer’s agents.

Buy in the last Tower if you have to. The cost will be more than the 1^st Tower. However, there’s usually a longer period of time for potential appreciation before you’re required to take possession and a mortgage.  In the meantime, you’re carefree just awaiting your unit’s potential appreciation.

 Thanks for the question, Richard  Good luck!

~Demi

Disclaimer: This article is simply an opinion. It is not meant to provide financial, legal or professional real estate advice.  Please contact your accountant, attorney and real estate agent for professional direction for your particular needs.