Anyone who has experience in real estate investing knows it is simply impossible to categorize or predict every factor of a certain investment.  Instead, real estate investors must be content with gleaning as much information as they can through experience and through other’s experiences.

So, while acknowledging that investing always has a certain amount of the unpredictable mixed into the equation, let’s look at a few known benefits behind pre-construction investing—specifically benefits associated with a short-term hold on the property versus a long-term hold.  And focusing the scope a bit more, consider the type of investment where a property is held during construction and sold once it’s completed.

The financial benefits of this scenario are extensive, to say the least.  Let’s look at a ridiculously simplified, but nonetheless accurate, picture of one way to make money.  An investor purchases a pre-constructed home below-market value.  They are privy to this low price since they are taking on a certain amount of risk.  This is called “instant equity.”  Once the house is built, the investor can sell that house for a higher price, making a nice profit.

While “instant equity” is the main appeal for many pre-construction investors, there are other benefits as well.  With a pre-construction investment of this nature, you buy a property before the normal investing headaches surface.  For example, there are no unpredictable tenants who are unable to pay rent on time—ever.

And, since many mortgage lenders offer Construction to Permanent loans which do not require monthly payments until construction is complete, you do not have to worry about paying monthly during the construction phase.  Pre-construction investing also means no “fixing up” required.  How could a house need repairs that’s in the process of being built?

The list goes on.

There are also no Home Owner’s Association fees during this phase, which any previous homeowner/investor recognizes as a substantial financial relief.  Neither do maintenance costs surface in pre-constructed properties.  And however basic these benefits may seem, they are indeed valid and worth noting.  Just ask investors who have experienced the frustrations of undependable tenants or trying to rid a house of mold for instance.