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How To Get Started In Preconstruction Investing?
Through our website, GetPreConstructionDeals.com, 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
Before you even begin
investing, you need a working knowledge of exactly what is meant
by “preconstruction” investing, why has preconstruction
investing generated returns in excess of 100% per year for many
investors, what is the terminology used in preconstruction real
estate investing, etc. The good news is this is your easiest
step to take.
As an example, in this stage you will learn terms like
reservation, hard contract, assignment of contract, letter of
credit, to name a few. Even if you are new to investing, don’t
let that intimidate you. Whenever I teach a class on this topic,
it only takes about 30 to 60 minutes to get everybody up to
speed on this.
So how do you learn the mechanics of being a preconstruction
real estate investor? My suggestion is to take advantage of the
free resources available on the internet. For example, at
GetPreConstructionDeals.com we give a way a 30-page ebook about
preconstruction investing that will walk you through this basic
terminology and will give you some real world preconstruction
real estate project examples. Also, if you conduct an internet
search on “preconstruction” “preconstruction investing”
“preconstruction condo”, etc., you will find tons of websites
with this type of information readily available. Give yourself
an evening or two and you should be a master. Unfortunately,
over 80% of new investors stop after Step 1 and immediately want
to look for “deals”. In my opinion, this is a big mistake
because they are lacking what separates the beginning investor
from the street-seasoned preconstruction investor; the
methodology to RAPIDLY pick “smart investments”
FINDING PRECONSTRUCTION PROJECTS
If you did an internet search
in Step 1 above, did you notice how many real estate web sites
you found with preconstruction investments on them? If not,
simply put in the term “Miami preconstruction” in any internet
search engine and you will see the number of results. Here is a
test for you. From the internet searches done above, can you
rapidly look at those projects and choose which ones might be
worthy of further investigation? Most people become overwhelmed
at this point whereas most savvy investors could sort through
most of these in a matter of minutes.
Over the years, in both the stock and the real estate markets, I
have had the opportunity to work with some truly outstanding
investors and I have also seen many, many beginners. When a
beginner looks at a preconstruction investment, they ask the
real estate person “How much will I likely make on this
investment and should I buy it?” When an experienced investor
looks at the same investment, they first ask THEMSELVES “Is this
investment really low risk and if so, how much money is really
at risk?” Then they ask THEMSELVES “How much money am I likely
to make if this investment works?” In their mind, they are
trying to determine the amount of reward, relative to the risk.
They know that the person marketing this project is UNLIKELY to
think this way but they know how to ask the right questions to
quickly decide if this project has an acceptable reward-to-risk
ratio for THEMSELVES.
If you are reasonably new to investing, or have always counted
on others to make investment decisions for you, how do you
perform Step 2? Simple. You must learn how a savvy investor
thinks, how they calculate risk, what back-up plans they have in
place in case the investment does not work, how they calculate
reward, etc. None of this is rocket science or even difficult to
do. If you’re new to preconstruction investing and are trying to
do all this on your own, it can be a daunting task, however. I
find that truly savvy investors are always talking to others,
getting their opinions, learning anything they can to make THEIR
OWN decision. They know that every little tidbit they can learn
can literally mean several 10’s of thousands of
dollars into
their own pockets.
Practically, you need somebody to mentor you that has “been to
the dance” many times before. If you know somebody in that
category, buy them lunch, dinner, movie tickets, whatever and
ask if they would look over your shoulder. If you know several
people in this category, better yet. Your lunch bills will be
pricey but your education gained will be priceless.
In addition, learning to think like a savvy preconstruction
investor is the reason that we created our original home study
course as well as our more complete live teleseminar course.
Many people don’t have someone to turn to other than maybe the
real estate person bringing them the project. I personally find
that most real estate agents/brokers are fantastic resources for
information, however most do not analyze the investment like I
would. If you ever find yourself asking your agent or
salesperson if “they really think you should buy this,” then
that is probably a good indication that you are ill prepared.
No matter how you accomplish it, learn to think like a savvy
investor for YOURSELF; it just is not that hard to do.
GROWING YOUR PORTFOLIO
Once you think like a pro in Step 2, you
will have just created a problem for yourself: you will probably
find that few preconstruction projects will fit your objectives.
New investors tend to think this is like the stock market…..
When they are ready to invest, you should just be able to plunk
down your money and move forward. Realistically, in the stock
market and the preconstruction market, TRUE OPPORTUNITIES appear
when they are good and ready. When that occurs, and only at that
time, then the savvy investor will pounce with lightning speed.
Remember, for many people, a couple of good investments PER YEAR
is plenty and may then more investment returns than they ever
dreamed possible.
While this may be hard to imagine right now, after Step 2 you
should have a clear understanding of the type of investments
that you would consider. As an example, suppose you end up
concluding that you really like condo/town home projects, not on
the beach, and in the southeast. In addition, you want these
investments in some emerging markets but not necessarily those
that have been explosive for a long time. Great! Now start
getting on lists of brokers/developers that bring out those
projects. If you can work with a group of like minded people,
all the better because you can share the workload and also have
additional clout because of a higher potential buying power than
just one individual.
I will caution you however that when you think like a savvy
investor, you are going to want a lot more information than is
typically provided by these types of sources. You will want a
true assessment of the local market (other than “boy has this
been hot”), you will want a true assessment of the amount of
similar projects that have been or are going to be offered, and
you are going to want to know a lot about who is buying these
projects and why.
Because we like a lot of detail and because we know we have to
move very quickly for good investments, we have always found it
better to operate as a group, rather than one lone person trying
to sort this out after work. In addition, we have found that by
pooling together the buying power of a group we can get much
better access to really good investments.
It is for these reasons that we at GetPreConstructionDeals.com
have created our “Mastermind Group.” I hope this has given you
an understanding of the 3 steps needed to become a true
preconstruction investor. Some people will look at this and say
that it is too hard, or too time consuming. Yes it will take
some time and some effort. The question that I always ask them
is then “How many hours in your regular job would it take you to
make some of the large $75,000+ returns that some
preconstruction investors are making?”
About the Author
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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