If you're reading this blog, then you’re a real estate investor.
I'd say that’s pretty obvious from the title of the blog.
But the reality is that for most of us, whether you’re a seasoned investor or a newbie, it can be a challenge to find the right property.
That's why I have compiled a list of 13 things to consider when searching for a pre-build property.
If you’re looking to invest in property, then you need to be able to evaluate it to make sure that it has a good chance of earning money for you.
The main goal of this list is to help you to filter out the bad properties from the good ones.
I hope that by the end of this blog, you'll be able to identify which pre-build properties are best for you to invest in.
But first, let's look at the 13 things that you need to consider:
Location matters - so if your dream location isn't on the list, don't despair.
In fact, it may be worth going somewhere less glamorous simply because there will be more of those places to choose from.
You see, what happens is that as prices continue to rise, developers start offering higher and higher spec homes.
This means there are a lot of buyers now competing for the few remaining units that are available.
So rather than be stuck with the few units that might remain unsold, it makes sense for you to go to an area where there are many more options available.
When you're thinking about investing in property, you ideally want to buy an investment property that will deliver consistent returns over time.
So one thing you want to look for is how good the layout of the house looks.
Of course your primary concern should always be the quality of the design too.
While some builders won't take too much trouble designing their houses, others do offer good designs.
And even though a lot of the developers out there only spend a tiny percentage of their profits on the design work, they still do put a huge amount of effort into making the design look top notch.
As mentioned earlier, the layout of the house also needs to be considered.
One of the key things that people tend to buy for is the floorplan of the home.
Because if a person likes a particular floorplan, then they might be willing to pay a premium price for that particular model.
However, just like layouts, we all have different tastes when it comes to home layouts.
Some people love open living spaces while other people prefer closed off rooms to make them feel cozier.
Whatever works for you may not work for everyone else so it's important to know what kinds of layouts work well for you.
Also, don't forget to check out the master bedroom layout since this feature tends to be very important for investors.
It's no surprise that when you move into a neighbourhood that feels safe and vibrant at night, residents begin spending their evenings outside rather than inside watching TV.
So if you plan to do the same, then ensure that the neighbourhood is full of local bars, restaurants, cafes, shops, schools, etc.
Since these kinds of amenities will improve the neighbourhood, you can bet that the value of adjacent properties will increase in tandem as well.
Another major selling point of property is its features.
You won't believe how high the resale value of a home really is because of the quality of the features that come standard.
For example, would you expect the following features to be included inside every unit?
An automatic door opener
A washing machine
These are just some of the basic qualities that you can expect to see in any good home and you can easily add up the cost of purchasing one of these units to add up to anywhere between $30k-$50k.
Another major factor to consider when buying property is the building standards that apply to each one.
For example, a good number of home owners today have opted for eco-friendly materials. These include wood, stone, and cork flooring instead of traditional carpeting.
They also typically use LED lighting to create a more energy efficient environment.
You can also expect to get many of these types of features at below-market prices if you decide to purchase a new home.
Some buyers look for properties that have recently completed construction while others prefer to invest in properties that are already under construction.
The truth is that many of the houses that are currently being built have been fully built before they made the decision to sell.
That said, there’s nothing wrong with waiting for an older property to reach this stage but you need to remember that it can definitely take longer to sell that way.
On the flipside, if you buy a newer property that doesn't yet have a finished basement, then you'll almost certainly save yourself several thousand dollars in monthly payments (since you won't have to pay for the unfinished space).
Just like properties with construction costs, there are also two types of financing.
They are conventional loans and mortgages.
And while the conventional loan seems like the obvious choice, it can actually carry a substantially higher interest rate than other types of debt.
Mortgage rates are often around 3% whereas conventional lending can be as high as 8%.
This is due to the risk involved in purchasing such a large asset. Although this level of finance should never become necessary, you should consider it if you’re unable to secure conventional loans through banks or alternative lenders.
Many home buyers may have had the experience of buying a property that requires a lot of ongoing maintenance.
And with those ongoing costs, it becomes a lot easier to lose sight of why you wanted to buy such a property in the first place.
Most of us probably know how stressful it can be to maintain a rental property and it can be quite discouraging when something goes wrong and we find ourselves having to fix costly issues.
With that being said, you should also consider the number of people who manage the property or you are planning to hire someone to do so.
It pays to know ahead of time before deciding to enter into such a commitment.
Even though you are buying a pre-built home, you'll still likely be responsible for the utilities, taxes, fees, etc. associated with owning the home.
So if you can reduce those expenses significantly, then you should.
Another consideration to make sure you understand is the occupancy restrictions and zoning rules for the area that you intend to live in.
For example, you might want to find housing that allows children to play outside without causing noise pollution.
Or maybe you'd prefer housing that does not allow parking on weekends.
If possible, you’d better make sure that the kind of dwelling you desire is allowed in that specific community.
Similarly, zoning rules usually state that you cannot build multiple dwellings in a single block or townhouse-style development.
For most people, a big part of choosing where to settle down is finding a place that feels like a 'home away from home.”
In general, you want to make sure that the community you select is safe enough, provides easy access to schools, public transportation, shops, parks, etc.
And to be honest, you don't want to make a mistake and accidentally end up settling in a neighborhood that is unsafe or undesirable.
Therefore, it's best if you do your research before finalizing on a purchase.
Now is the perfect moment to ask yourself whether your timing and approach to investing in property was right or not.
After all, markets change and conditions fluctuate all the time. So you'd want to make sure that you've got a solid understanding of whether the market is trending upward or downward.
You'll then be able to determine whether investing in property is really worthwhile at that given moment since real estate markets are cyclical.
So there you go! The above list has been compiled to help you in identifying what makes for a successful pre-construction development project. And as you can see from this, they’re quite different than regular apartment complexes.
With that in mind, we can say that the following will serve as some good practice when looking to invest in pre-development properties:
Identify a company with a proven track record of success: We should stress that many developers fail.
Do thorough due diligence on the company. Check out their latest projects online; look into any major scandals or complaints they've had to deal with over the years; and more importantly ask them lots of questions.
Only consider buying from a developer who has a clear business plan and strategy for how they intend to proceed with their projects when looking to buy from them.
Know exactly what kind of property you're purchasing and how you'll benefit from it. Remember that you might not be a great builder (or even a decent one) but someone else may get much better results from the land and structure that you build on.
Finally, always remember to keep your emotions in check. No matter how good a developer sounds, it only takes one bad idea, one big lawsuit, or one real estate investment gone wrong to ruin them completely.
When doing a real estate investment, it's important to know that things aren't black and white. There's a reason why the phrase 'buyer beware' exists. It means that no one is above board when it comes to selling off property, which is definitely not the case when buying properties for resale. Because it's such an intricate process, it's important not to take anything for granted.