How to Take Advantage of Leverage to Profit in Pre-Construction New Orleans LA

Buying pre-construction can be a profitable short-term investment strategy, if the property appreciates before the home is completed. Not only is the developer willing to offer discounts for early buyers, but you can take advantage of leverage to cash out a significant profit at the time of completion. The following article from Pathfinder International explains how to do this.

![filekey=|3979| align=|right| caption=|| alt=|pre-construction investment|]Buying pre-construction gives you the potential to make returns of 100%, 200%, or even much more…and fast. It can also offer you the opportunity to build a rental portfolio with little money down.

Buying pre-construction, or off-plan, is where you buy into a development before it has been constructed. You are relying on a set of architectural plans. Frequently, developers will offer substantial discounts to buy off-plan. The best pre-construction projects will sell out before a shovel goes in the ground. Often the best units go to “insiders.”

Developers need investor funds to stay in business. That’s a strong incentive to create simple and profitable investor terms. Also, bank finance for construction costs will typically be dependent on a certain level of presales. The developer will want to hit that number as soon as possible. By shortening the length of the project, he can increase his return on investment (ROI). This timing issue creates a symbiotic relationship between developers and investors.

If the developer has a good track record, banks practically compete with each other to lend him the money for a deal like this (under normal credit market circumstances). With presales in place, the bank’s risk is minimized. By simplifying the deal, the developer minimizes his administration costs while securing his construction funds at a competitive rate.

Buying off-plan makes more sense for the investor than for someone buying for personal use. For the investor, the unit doesn’t have to meet your personal taste, and you probably don’t mind that it will take up to a few years before you take possession of your unit, as long as the market is seeing appreciation. It should, however, be a property that a large portion of the general public wouldn’t mind owning or renting. You are buying the unit to eventually sell or rent to an end user, and you want to make sure the property will be attractive to that level of the market.

The end user may be a long-term renter, a first-time homebuyer, a short-term vacationer, or even another investor. That will depend on where and what you are buying. Analyze who the end user will be before you put your money down, as you will want to make sure there will be a big enough market to sell your property into.

You get a discounted price to compensate you for taking on some of the early development risk, but the real incentive to buy pre-construction comes from leverage. While the terms of the pay...

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