Investing in a property that is new or under construction is an exciting prospect. However, this excitement naturally comes with uncertainty since the project is not yet complete. If investing in an emerging property, investors should develop or follow a new construction checklist to ensure that they reap rewards from their investment.
1. Acquire a real estate agent
It is essential that a potential investor acquire an independent real estate professional to give impartial advice, rather than simply relying on what the developer tells you. Receiving third-party expert advice will help you make decisions based on facts rather than on potential misinformation.
2. Make sure you trust the developer
Developers will be the source of much of your information about the property. Therefore, it is essential that you do research on the developer to make sure that he or she has good business practices and can be counted on to finish projects. One risk of investing in a property yet to be built is that the developer may not have all the rights to start building. A requirement on your new construction checklist should be to confirm the credentials of a developer to make sure that you’re purchasing a future home, not a set of blueprints.
3. Find out the actual market value of the property
After the home is completed, the price that the developer will furnish is likely to be significantly different from the current cost of the property. Make sure you know the value of the ground you’re standing on by researching the current value of the development.
4. Determine how many other buyers there really are
To increase the price of their properties, developers often inflate the number of investors they have already acquired. However, an obvious rule of thumb is that if would-be buyers haven’t signed a contract yet, they are not yet investors, no matter what the developer claims.
5. Hire an attorney to carefully review all relevant documents and contracts
An important component of your new construction checklist is to make sure you are not getting the short end of the stick in your contract with the developer. A skilled real estate attorney will be on the lookout for unfavorable clauses dropped into the contract, including provisions that prohibit resale of the home or require the new owner to reside in the home for a certain amount of time. These provisions are sometimes favored by developers but are certainly not helpful for investors looking to flip the property.
6. Taxes, Taxes, Taxes.
When a developer is trying to make a sale, naturally he or she may not emphasize the taxes you will have to pay. In truth, developers are often not in a position to know the true extent of your property taxes, as tax assessors normally do not perform appraisals of mere blueprints. Therefore, you’ll have to do your own research, which you can start by calling your local tax office to get an estimate.
7. Order a thorough inspection
Shoddy craftsmanship is a reality for some construction projects. You don’t want to purchase a property only to learn that it has major defects that could have been spotted before you shelled out substantial funds. An inspection is an essential part of a new construction checklist. Have an inspection performed no later than one week before you close the deal.
8. Put your payments in an escrow account
You don’t want your payments to end up in sole control of the developer; if there is a problem, you may not be able to get your money back. Keeping your money under the control of a neutral third party will go a long way to establishing peace of mind.
Careful research helps you meet your investment goals
Investing in a new construction project can be quite lucrative, no doubt. Yet certain precautions necessarily have to be taken when purchasing a property still under construction. Developing or following a new construction checklist should help you make a solid new investment that puts you on the path to substantial real estate profits.