Challenges selling pre-construction home sites in second home markets

Marketing and selling new housing developments pre-construction is a challenging effort and often meets with less success when compared with the high-rise condo-hotels down the street.

One of the major reasons is the mindset of the buyers and what makes them comfortable making a purchase decision before the property is built. These buying comfort factors include:

• Use of the Property
• Rental Income and Management
• Appreciation

• Build up the vision, resources and capabilities of the developer and the team. Use the marketing collateral and channels to create of level of comfort in the buyers mind about the developer.
• Include in the proposal a plan how rentals will be managed and handled using well known and established procedures and technologies that will ensure that, if needed, the properties can be rented competitively.
• Use every available marketing channel to make known the project uniqueness and what the finished product will be like including the Internet and television spots. Today’s technology allows for very cost effective advertising on the Internet and now television using services such as Google AdWords http://adwords.google.com and Spot Runner http://www.spotrunner.com/.
• Make known all the factors in the local area that will contribute to the appreciation of property values in the near future, especially as they relate to the new housing development.

The new housing developer has a much better chance of selling pre-construction by addressing the potential buyers comfort zone criteria head-on.

Mike Stuart 1st Online Realty

With the sales levels and price appreciation flattening out, we are seeing less buyers willing to make preconstruction speculative purchases.

Investors Focusing on Rentals and Texas Real Estate

During the housing boom, many individual investors went deep into debt to buy investment properties such as rental homes and condos in hopes of selling quickly to cash in on soaring prices.

Despite the end of the speculative craze, a number of markets in the fragmented real estate world continue to lure investors willing to adjust their expectations.

As rents take off, buyers are increasingly focusing on multi-unit rental properties instead of the single-family condos and homes that were popular during the housing boom.

Some investors are also shifting money into regions of the country where they expect prices to continue to rise, such as Texas, and developers are also crafting special promotions, such as guaranteed rental income for as long as five years.

More investors are focusing on the fundamentals that guided the market before the housing boom, especially cash flow, the ability to actually make money from rentals, rather than from quickly selling the property. They are sticking with properties that turn a profit after factoring in interest payments, taxes and other expenses. Making a minimum of $50 to $125 monthly on each house is what many are shooting for and then in six or seven years sell the property.

With home prices softening in many markets, some advisers are counseling clients to focus on multifamily and commercial properties. Homes and condos are not the place for a person who wants to make good, solid real-estate investments. Small apartment buildings and commercial properties are now more stable investments.

There is an increased interest in commercial properties because asking prices for many residential properties are unrealistic, with investors expecting the property to at least pay the mortgage with a 20% or 25% down payment.

Many speculators who bought property during the boom may now be facing a tough choice. They can either lose a moderate amount of money each month while they wait for the market to rebound, or they can sell and take the pain all at once.

As the market for homes and condos has cooled, some developers are unveiling special promotions designed to appeal to investors worried about cash flow. Some condominium developers are offering rental-assurance programs that stretches for as long as five years, but investors should approach such offers cautiously, as the market is seeing a lot of developers and builders breaking their promises to buyers.

Reference: The Wall Street Journal Online