|Real Estate Information|
How To Get Started In Preconstruction Investing?
Through our website the most common question that we receive is "How do I get rapidly started in preconstruction investing". Realistically, you only need to take three steps on your path from being a "beginner"preconstruction investor to one that is extremely savvy.
MECHANICS OF PRECONSTRUCTION INVESTING
As an example, in this stage you will learn terms likereservation, hard contract, assignment of contract, letter ofcredit, to name a few. Even if you are new to investing, don'tlet that intimidate you. Whenever I teach a class on this topic,it only takes about 30 to 60 minutes to get everybody up tospeed on this.
So how do you learn the mechanics of being a preconstructionreal estate investor? My suggestion is to take advantage of thefree resources available on the internet. For example, atGetPreConstructionDeals.com we give a way a 30-page ebook aboutpreconstruction investing that will walk you through this basicterminology and will give you some real world preconstructionreal estate project examples. Also, if you conduct an internetsearch on "preconstruction" "preconstruction investing""preconstruction condo", etc., you will find tons of websiteswith this type of information readily available. Give yourselfan evening or two and you should be a master. Unfortunately,over 80% of new investors stop after Step 1 and immediately wantto look for "deals". In my opinion, this is a big mistakebecause they are lacking what separates the beginning investorfrom the street-seasoned preconstruction investor; themethodology to RAPIDLY pick "smart investments"
FINDING PRECONSTRUCTION PROJECTS
Over the years, in both the stock and the real estate markets, Ihave had the opportunity to work with some truly outstandinginvestors and I have also seen many, many beginners. When abeginner looks at a preconstruction investment, they ask thereal estate person "How much will I likely make on thisinvestment and should I buy it?" When an experienced investorlooks at the same investment, they first ask THEMSELVES "Is thisinvestment really low risk and if so, how much money is reallyat risk?" Then they ask THEMSELVES "How much money am I likelyto make if this investment works?" In their mind, they aretrying to determine the amount of reward, relative to the risk.They know that the person marketing this project is UNLIKELY tothink this way but they know how to ask the right questions toquickly decide if this project has an acceptable reward-to-riskratio for THEMSELVES.
If you are reasonably new to investing, or have always countedon others to make investment decisions for you, how do youperform Step 2? Simple. You must learn how a savvy investorthinks, how they calculate risk, what back-up plans they have inplace in case the investment does not work, how they calculatereward, etc. None of this is rocket science or even difficult todo. If you're new to preconstruction investing and are trying todo all this on your own, it can be a daunting task, however. Ifind that truly savvy investors are always talking to others,getting their opinions, learning anything they can to make THEIROWN decision. They know that every little tidbit they can learncan literally mean several 10's of thousands of dollars intotheir own pockets.
Practically, you need somebody to mentor you that has "been tothe dance" many times before. If you know somebody in thatcategory, buy them lunch, dinner, movie tickets, whatever andask if they would look over your shoulder. If you know severalpeople in this category, better yet. Your lunch bills will bepricey but your education gained will be priceless.
In addition, learning to think like a savvy preconstructioninvestor is the reason that we created our original home studycourse as well as our more complete live teleseminar course.Many people don't have someone to turn to other than maybe thereal estate person bringing them the project. I personally findthat most real estate agents/brokers are fantastic resources forinformation, however most do not analyze the investment like Iwould. If you ever find yourself asking your agent orsalesperson if "they really think you should buy this," thenthat is probably a good indication that you are ill prepared.
No matter how you accomplish it, learn to think like a savvyinvestor for YOURSELF; it just is not that hard to do.
GROWING YOUR PORTFOLIO
While this may be hard to imagine right now, after Step 2 youshould have a clear understanding of the type of investmentsthat you would consider. As an example, suppose you end upconcluding that you really like condo/town home projects, not onthe beach, and in the southeast. In addition, you want theseinvestments in some emerging markets but not necessarily thosethat have been explosive for a long time. Great! Now startgetting on lists of brokers/developers that bring out thoseprojects. If you can work with a group of like minded people,all the better because you can share the workload and also haveadditional clout because of a higher potential buying power thanjust one individual.
I will caution you however that when you think like a savvyinvestor, you are going to want a lot more information than istypically provided by these types of sources. You will want atrue assessment of the local market (other than "boy has thisbeen hot"), you will want a true assessment of the amount ofsimilar projects that have been or are going to be offered, andyou are going to want to know a lot about who is buying theseprojects and why.
Because we like a lot of detail and because we know we have tomove very quickly for good investments, we have always found itbetter to operate as a group, rather than one lone person tryingto sort this out after work. In addition, we have found that bypooling together the buying power of a group we can get muchbetter access to really good investments.
It is for these reasons that we at GetPreConstructionDeals.comhave created our "Mastermind Group." I hope this has given youan understanding of the 3 steps needed to become a truepreconstruction investor. Some people will look at this and saythat it is too hard, or too time consuming. Yes it will takesome time and some effort. The question that I always ask themis then "How many hours in your regular job would it take you tomake some of the large $75,000+ returns that somepreconstruction investors are making?"
Dr. Chris Anderson is a co-founder of http://www.GetPreconstructionDeals.com and is referenced in many venues including the New York Times and USA Today. Download his free, 30+ page preconstruction investing ebook today at Get Preconstruction e-Book
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