Investing in Wholesale Preconstruction Real Estate

Investing in Wholesale Preconstruction Real Estate
Buying in bulk can help increase profits
Published on: Tuesday, December 25, 2007Written by: Beth Anderson

Buying in bulk is a strategy many shoppers use to save money. That same strategy can also help real estate investors expand their profits.

Real estate developers typically have to pre-sell a certain percentage of condo or home developments to get a construction loan from banks. In addition to allowing for bank financing, getting the first few units sold tends to help start sales momentum and helps the developers get started on the project more quickly. As a result, developers are often willing to offer huge discounts in order to move large blocks of units. Most investors, though, will likely find it difficult to come up with the funds necessary to purchase a block of condos.

Investors interested in this type of investment should be glad to know that there are now several institutions that work to bring together investors to buy these bulk offerings. These institutions get deep discounts from the developers and pass them along to buyers, who can then buy individual properties at prices much lower than what they could have bought them for if they had purchased directly though the developer.

Most investors, after buying a property as part of a bulk rate discount preconstruction offering, sell it after construction is completed at retail price, often making thousands in profit. This investment strategy is called wholesale preconstruction, bulk preconstruction or preconstruction syndication.