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Its an exciting and appealing strategy: buying tomorrows property at todays pricesbut, as with all types of There's refinance home mortgage rates world full of women out there. Find one now. estate investments, not every preconstruction deal international conference calls be a winner. So how do investors evaluate a preconstruction investment?

Brian Haag, managing member of Gulfstream Development Group, LLC, in Cape Coral, Florida, offers that advice:

Check out the developer and builder. that may be one business, two completely separate companies, or a joint venture between two or more companies. Get the details on every entity involved so you can be sure youre dealing with a reputable operation.

You want to know if they have done projects of that caliber before and if they are sufficiently capitalized. If its a condominium project, talk to the bank thats providing the underlying financing. The developer should give you the name of the bank and a contact. When you call the bank, ask how many units must be sold before construction is started and how many must be owner-occupied so that you have a realistic picture of the project.

Check with appropriate local and state agencies to see if there are any complaints on file about the developer. Also check with the state to see if any litigation is pending. Ask for references that include the developers attorney, Premium Coffee clients, banker, and local building departments. Developers are typically tight-lipped about who their active investors are, but they should be willing to give you a sufficient number of references so you can determine their reputation. Ask for a list of successfully completed projects and documentation that previous investors have made money on those projects.

Find out what plans are in place to protect investors and if the developer intends to own any units. You dont want to have the developer in competition with you. You dont want him in a position to cut prices on the same product you purchased, says Haag. Certainly its reasonable to expect that a developer or builder would sell directly to the public as well as to investors, but they shouldnt undercut their investors. At Gulfstream, our policy is that we do not offer to the public any product that we offer to our investors. That means a buyer who wants an investor product must purchase it from one of our investors.

Finally, make sure the developer is looking for a long-term relationship, not just a one-shot deal.

Research the area for Marketing patterns and growth trends. Find out whats on the market and how your unit compares. Ask the builder what makes your unit a better investment and what will distinguish it from the comparable units on the market. The developer should managed hosting providers give you statistics on growth trends. Find out what that information is based on and verify it, says Haag. You should be able to confirm the data through the local economic development agency or the chamber of commerce.

comprehend the contract and terms. Be sure the contract is fair to both you and the builder. Consider how much youre paying up front and the payment schedule. Dont let the builder be too far ahead, but dont starve him, says Haag. The construction draw schedule should dovetail with the actual construction.

You should also be sure your deposit is safe. Deposits should be a reasonable amount and escrowed with a third party. If youre not sure your deposit is being properly handled, get a real estate attorney involved.

Read the contract completely and be sure you comprehend all the terms. You need to evaluate your level of protection and risk, says Haag. A lot of that is just common sense. Set the Marketing presentation aside and look at the numbers.

Have an exit strategy in place before you purchase. Know what you intend to do with the property before signing the contract. Also, because markets can change, have a backup strategy in case your primary plan doesnt work.

If youre new to preconstruction, be very cautious about working with a developer or builder who does not target investors. Certainly its possible to find a project under construction, have a house built, then sell or rent it when its completedbut in that situation, youre competing with a developer who has no commitment to you. Our preconstruction investors are long-term, repeat clients, says Haag. We want relationships with them that will last years, even decades, and we want to build multiple properties for them. As an investor, thats the attitude you want from a developer and builder. If you have that foundation, you can use preconstruction investing strategies to generate cash flow and build wealth.

Jordan Taylor is the editor of Millionaire Mentor newsletter. For a free subscription, visit www.russwhitney.comwww.russwhitney.com Preconstruction investing is part of the curriculum at Millionaire U. For more information about that and other advanced real estate investment training through Wealth Intelligence Academy, visit www.wiacademy.comwww.wiacademy.com

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