Basic Rules of Preconstruction Investment Real Estate
1. Read Small Print - Before investing in a development, be sure not to fall victim to the curse of the small print. Avoid ending up the subject of those horror stories about real estate investors who are suckered into scandalous contracts with real estate developers. Some real estate developers will not let you sell the property until years after it is finished and others will charge huge penalties if the property is sold early. Always, have an attorney look at every contract before you sign anything.
2. Find a Preconstruction Brokerage - Unless you are VERY well connected in the area's preconstruction market, it's a good idea to go through a real estate brokerage that specializes in preconstruction real estate developments. There are several reasons why using a quality brokerage can help you, but most importantly, they know the developers and can discern between which can ensure quality and which are "accident prone".
3. Research the Developer's Past Projects - If the developer has had huge delays in past preconstruction projects, it will probably happen in the next several projects. Remember that your time is money - even if you get your full deposit back 2 years later, because of constant delays you may lose hundreds of thousands of dollars worth of wasted time and resources.
***Note*** As real estate developers have learned that the word "preconstruction" alone can sell out a project, they have created a new trend in the industry by labeling every phase of the project a "preconstruction phase." Often these are low-quality condo conversions or condotels that are not worth half the asking price. BE SURE you are buying in the actual preconstruction phase before purchasing!!!
Just remember, the bigger the preconstruction real estate market gets, the more you have to watch out for fly-by-night developers and unethical brokerages that don't have your best interests in mind.