Stupid Developers??

I think not. With the state of the current market I am constantly receiving phone calls from investors and home buyers alike who are sold on the idea that anything preconstruction is a great idea. The investors think that it means instant money in the bank at closing time, and home buyers think this is way to get the most bang for their respective bucks. Allow me to differ.....

While many small fortunes have been made in recent months on preconstruction "flipping," the idea that developers sell cheap to complete the development is erroneous. If anything, developers have cashed in on the recent buying frenzy boosting their profits to all time highs. While I do not argue the point that costs have increased to builders across the board, I do take issue with the thinking of many buyers and investors who earmark these products as "good deals." I am currently watching several scenarios play out where investors bought a product from a developer at such a high price that their margins after the flip, coupled with their tax liability from the resale make their efforts look like a waste of time. For the couple thousand dollars they make they should have just taken a vacation instead of sinking money into a low paying investment.

My advice: When you are investing or looking to purchase a residence strategically, don't follow the masses. While many have made money buying straight from developers in the past, I think that the developers are not as dumb as some think they are. They realize that they can sell to end users at a premium, and that's exactly what they are doing. The key to successful investing and purchasing for profit in this shifting market is to be DIFFERENT. I think that there are a lot of sleeper deals out there on existing property that have the potential for profit. So before you rush to sign your life away on a half of a million dollar condo that isn't even built yet, check the markets pulse and look around first. While there are some deals still out there, remember the pop culture adage "fools rush in."