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Pre-construction Investing
Investing in real estate has long been known as one of the safer places to put your money. In our present economy, real estate, especially water or oceanfront resorts are the hottest commodity around. Florida has always been a favorite, to the point that Buildings are Skyrocketing up at an enormous rate.
Buy Early Pay Less!
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 Pre-construction 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%!)
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