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Pre-Construction Purchases

Another type of investment is Pre-construction: purchasing a property from a development firm before it is built. This is very common for condominium and gated community developments. Pre-construction pricing can be far below what the home or condo will list for when it is fully constructed 12 or 18 months after you purchase.

Some Pre-construction opportunities are assignable, meaning you can resell the property before closing. Others require closing (waiting until it is fully constructed) before you can sell the property. Our Communities & PreConstruction section highlights some current pre-construction projects.

Why Is Pre-Construction Property Available?

Financial backers want to gauge the interest and sale-ability
of a developer's project. The financial backers may require the developer to have a percentage of the units reserved before the project can move forward. This translates into savings for the buyer. The developer needs these pre-sale reservations to prove the project and concept and secure financing. Often, this may mean there are incentives to early buyers. The potential for appreciation of the property at low out-of-pocket expense to you is significant. A typical down payment is 10-20%, with no other monies due until closing (or if the unit is assignable, you can sell before closing with no other monies due at all).

Because the home is under construction, there are no property taxes yet due nor are there operating costs or mortgage payments. So, for example, it's possible to purchase a property that will be valued at $600,000 in 18 months, but by buying now purchase it for $500,000, with only 10% of your money tied up. Pre-Construction Sales PaceWhile it takes 18-24 months to construct the development, sales of the units tends to go quickly. The first phase of Tarpon Point Marina Landings Towers in Cape Coral, for example, sold out in one evening (about 100 units were sold, starting at $500,000 and topping out at over $1 million for penthouse condos).

Developers typically "release" units for sales in phases, starting with building #1, then offering building #2 six months later, and so on. Waiting lists for developments that are planning to release soon are common. Some developers' waiting lists are so extensive that they hold "lotteries" to narrow down the prospective-buyer list.

How the Pre-Construction Reservation Process Works

Each developer has their own process, but in general the steps for reserving a new condominium are:

1. Get on the priority reservation list. 2. Select the unit. 3. Sign contract and submit deposit (typically 10%-20%); deposit is held in escrow with a title company. 4. Receive association documents (condo docs); this may be weeks or months after contract if the developer is awaiting finalization of condo docs and permits. 5. 15 day cancellation right after receipt of condo docs, with deposit fully refundable. No other monies due until closing (30 days to two+ years).

There are some differences, depending on the developer's policies. Right now, very few developers are offering assignable contracts. Be sure to check the reservation and contracts for assignment/resale policies before signing up. Some developers might require progress payments if build-out is years down the road (although progress payments are typically only required for pre-construction of single family homes.)