If you've been following the housing market over the past few years, you're likely very familiar with the current trends. Prices and demand are way up, and supply is way down. We've seen historic highs in prices and historic lows in inventory. If you're looking to invest and start building your real estate portfolio, you may be wondering if now is the time. How can you compete with bidding wars on nearly every home on the market? The answer: new construction. Specifically, pre-construction properties.
Investing in a pre-construction property allows you to lock in a price, and enables you to hedge against price and cost increases. Here are just a few of the benefits of investing in a pre-construction property.
Get in Early and Capitalize on Pre-completion Prices
Savvy investors gravitate toward pre-construction projects because they promise a greater return on investment. Typically, developers offer competitive prices to entice people to buy into their projects early while still under construction. The cost of residences goes up as construction progresses. The best way to capitalize is to get in on a project that is launching presales soon or has just recently launched sales but has not yet listed on the MLS.
In addition to more favorable pricing, developers also may add in incentives for early buyers, such as upgraded finishes, storage, or parking. These upgrades can significantly impact the value of your property.
It should come as no surprise that prices on a pre-construction real estate project are subject to supply and demand. The asking prices are typically lowest during the initial stages. As the project nears completion, with fewer units available, asking prices go up.
Get the Best for Less
Low entry prices and massive property value appreciation are the most obvious benefits to buying early, but there are other ways you can maximize your investment gains. Besides builder-sponsored incentives, early investors get the best units without having to engage in costly bidding wars.
Buying early means you have your choice of floor plan and can lock in the building's premier residence at the best price. As an investor, this means you can command higher rental prices in the short term and turn a larger profit when you list it for sale.
A conventional property may take years to generate capital gains. With a pre-construction project, you receive price growth and capital appreciation upon finalizing the purchase. If you invest in an up-and-coming neighborhood, you can reap even bigger rewards.
Hedge against Inflation
You're essentially hedging against a rising housing market and inflation by buying early in a new construction building. According to NASDAQ, real estate is one of the best ways to hedge against inflation because it has intrinsic value and delivers consistent monthly income.
Furthermore, a real estate property is an excellent option because there's a perennial demand for housing, especially in markets like Massachusetts that offer an array of amenities like diverse employment opportunities, some of the country's best schools, and world-class hospitals.
Property values appreciate alongside rising inflation, and landlords can charge higher rent on their rental properties. That makes real estate properties a choice investment during times of high inflation.
40-year High Annual Inflation
Currently, the United States is facing a 40-year-high inflation rate. According to US inflation calculator, the country had an annual inflation rate of 7.9% in the 12 months leading up to February 2022.
The country's housing market has responded accordingly to the rising inflation. According to Massachusetts Association of Realtors (MARS), property values in Boston have appreciated by 7% to 12%. The median price for a single-family home in the Massachusetts/Boston housing market grew by 12.8% to $524,450, while the median asking price for a condominium in the same market grew by 7.1% to $450,000 compared to the previous year.
As mentioned above, the market is also experiencing rising demand and dwindling supply. Compared to the previous year, the number of single-family homes listings decreased by 14.8%, while condo listings declined by 23.1%.
Thanks to these record-breaking inflation levels, investors in pre-construction properties are almost guaranteed significant returns. With higher construction costs due to rising building materials and labor costs, the price of real estate is continuing to rise. If you're looking to build your real estate portfolio, now is the time to get in on the pre-construction market.
Leverage Your Limited Funds
Although the real estate market is subject to an up and down cycle, it's starkly different from other investment vehicles. Unlike stocks and mutual funds, you have complete control over your investment. If you buy a property and the market dips, you can choose to hold on and maximize your profits when the market rebounds.
With a pre-construction property, you're purchasing a tangible investment asset, which gives you leverage over your money. It enables you to buy a valuable investment vehicle and skyrocket your ROI. With pre-construction projects, you can leverage limited funds and earn great returns.
Buying a standard property requires you to raise the entire deposit. With a pre-construction property, you can often pay the down payment in four installments of 5% each. The installments are due 30 days after signing, 60 days after signing, 120 days after signing, and the remaining 5% is due at occupancy. That gives you greater control and flexibility over your finances while maximizing returns.
With financial products, your returns are directly tied to the amount of money you invest. With a real estate pre-construction deal, you make a down payment and earn returns based on the total value of the property. You earn more money because you make percentage gains based on a higher amount than you invested.
The Bottom Line
The Boston real estate market is red hot and the pace doesn't seem to show any signs of slowing down. With the amenities the city and state provide from healthcare to education, this will always be a desirable place to live. As a real estate investor, you can feel confident knowing that your property will provide you with financial gains for years to come.
Specifically, if you're investing in the Boston pre-construction condominium market, you get to skip the bidding war, lock in a premier residence with all the upgrades and finishes you love, and wrap yourself in the security of a sound investment. Very few investment vehicles allow you to beat the highest inflation rates in U.S. history while maximizing your ROI.
At CHARLESGATE, we exist to inspire and empower our clients, our team, and our communities to achieve more through comprehensive real estate solutions that redefine real estate for today's market. Contact us today and let us help you maximize your returns in the lucrative Boston pre-construction market.
A Sample Of CHARLESGATE's Exclusive New Condo Development Pipeline
- Mira, East Boston -64 brand new style-forward condos for those looking for urban living in an authentic city spot. Ask about our exclusive low-interest-rate programs and buyer incentives! Email the Mira team for details.
- 50 Leo, Brighton - 49 sleek, modern, and meticulously crafted condominiums in one of Boston's hottest neighborhoods.
- Walnut Crossing, Brookline - 14 luxury condominiums in a super desirable location offering the perfect blend of classic New England architecture with a sleek yet timeless European inspired interior.
- Gallery Residences at Arthaus, Allston - Boutique new construction living within a short walk to Boston landing in one of the most active development areas in the country with available garage parking. *only a few units remaining*
- BRIX, Salem - First-of-its-kind property on the North Shore with 60 condos delivering unbeatable urban living in the heart of cosmopolitan, downtown Salem *only a few units remaining*
- The Pacer, East Boston - An incredible investment opportunity situated at the entryway to the New Suffolk Downs *only a few units remaining*
- Cadence on Leo, Brighton - A new standard of sophistication in one of Boston’s most alluring neighborhoods.
- Nevins Hill, Brighton - A refreshing retreat to call home with timeless design and impeccable attention to detail.