Is a preconstruction second home right for you?

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Preconstruction vs. Resale, which Second Home Option Fits Your Needs?

Why some people buy preconstruction, and reap the benefits, and why others prefer their second homes with an already cultivated rental stream.

(PRWEB) March 3, 2005 -- Most investors realize that the best time to buy is when the prices are low, and sell when high, and for this reason, first release preconstruction pricing is the “holy grail” of second home investors. With builders in the Disney area typically increasing their prices by $5,000 every ten homes, the lucky few who use buyer’s agents, such as, to lock in the first one or two releases, ensure an almost forced equity rise during the construction of their property. For example: Emerald Island, a resort community a short distance from Disney World, releases their four bedroom house May 2003, at $226,900. The same property was selling for $378,900, in October 2004. This property showed a 39% increase on the total value of the property. If you assume the buyers had put 10% down, they would have leveraged $25,000, for a net gain of $152,000. This sort of return, although not typical, shows the potential for equity growth inherent with preconstruction pricing, so the obvious question is: Why doesn’t everyone buy preconstruction?

To answer this I will need you to imagine buying a product for $350,000, but I cannot show you a picture of it. I cannot guarantee you will make money with it, and I can’t guarantee it will sell immediately if you do not want it anymore. Sounds like a great deal doesn’t it? This is just an example of the obstacles to marketing preconstruction. Although there are many examples of success stories in the Orlando area with preconstruction, people still like to see the “bricks and mortar”. Many still have images of the swamp land sales in the middle of the last century, and Florida real estate will always live with that stigma.

Even if the trust issue is not a factor, most buyers will rent out their property to vacationers visiting area attractions, and depending on the build out of the community, your house could have construction vehicles in close proximity, making your rental home less desirable for the first few months after closing. This coupled with the ability to buy an existing furnished home and keep any future bookings that the property owner has, allows buyers to essentially buy a turn-key second home replete with income source, which they can fly down and see before closing.

If all the buyers wanted preconstruction, who would they sell their homes to, and make the profit they seek? If all the buyers wanted completed houses, how would the builders generate income to build the houses? Thank goodness there is still a good mix of the two, and as long as people visit Disney, there will be a booming second home market in Kissimmee & Orlando.

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