Frequently Asked Questions & Answers

What is preconstruction and why are South Florida Condos Hot?


Can I sell my preconstruction purchase before it’s completed?

You must have written permission from the developer.

  • You may sell your right to the condominium unit by transferring or assigning the contract to a subsequent purchaser.
  • You may sell your unit under a real estate contract upon completion of the condominium. Two real estate closings will occur simultaneously, your purchase, and the sale to your buyer.
How Does Florida Law Protect the Purchaser of a Preconstruction Property?

In Florida, purchasers have a fifteen (15) day rescission period starting with their receipt of the Public Offering Statement, which includes the condominium documents, association by-laws, preconstruction purchase contract and escrow agreement; to review and complete or rescind any condominium purchase and escrow agreement and receive a full refund of their deposit if they rescind.

The most important protection under Florida law is that your deposit is held in an escrow account. These funds will be not released until the closing of your unit unless the developer designates a portion of the deposits may be used for construction in the contract.

On what floor and what size unit should I buy?

If you are expecting to close and live in the residence then you should select the view and floor height that will appreciate most over time as well as one that you will enjoy living in. The higher floor with unobstructed views are the best.

If, however, you plan to lease the condo to a tenant, you will want one that appeals to the greatest number of potential tenants. This can also depend on the area your purchase is located. If you are in an urban environment, a one bedroom for single tenants may be best; in a resort area, a condo-hotel unit with a management program may work for you. In a suburban neighborhood, two bedrooms are often better because they attract couples without children, single parents with a child or singles with a roommate.

If you plan to sell your condo purchase for a profit as quickly as possible then the least expensive unit on the lowest floor (typically studios and one bedrooms) have shown the highest percentage of return based on previous condominium resales.

What are the advantages Tracey Schmitt, PA Group expertise when purchasing preconstruction condos?

As professional realtors, we will:

  • Alert you about new preconstruction projects before they are made public
  • Help you compare the pricing in similar buildings in the neighborhood
  • Inform you about community infrastructure developments such as service retail and civic investment that may effect the future value of your property
  • Help you negotiate the terms of the contract and advise you on alternative choices that may meet your needs
  • Share information regarding the relative financial strength and track record of a developer with you
  • Finally, since all realty fees are paid by the developer, you are getting my services for free!
What are the required deposits for preconstruction condos?

With most preconstruction condos you will be required to deposit twenty (20) percent by the time the developer “breaks ground”. Typically, there is an initial reservation fee, then the remainder of the first ten(10)percent at the time of contract. The final ten (10) percent is required when the developer breaks ground.

What is preconstruction?

Buying preconstruction, or off-plan, is where you buy into a development before it has been constructed. The only thing you have to trust in is a set of architectural plans. Frequently, developers will offer substantial discounts to buy preconstruction units. The best preconstruction projects will sell out before building actually starts. Often the best units go to insiders.

Why would a developer do this? 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 depend on a certain number 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. The developer will also want to share some of the risk by selling preconstruction. He knows he is giving a good deal based on today’s prices but who knows what the market could be like when the units are delivered in two years time. 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 getting his construction funds at a competitive rate.

What to Consider When Buying Preconstruction?

It should 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. Pay attention to how much similar supply is in the pipeline in the area. Leverage…preconstruction’s silver bullet. You get a discounted price to compensate you for taking on some of the early development risk, but the real incentive to buy preconstruction comes from leverage. While the terms of the payments vary from project to project, no matter what the terms are, you are leveraging your returns to some degree. A typical deal will start with a small down payment…say, 5%…and work through various staged (progress) payments during the construction period, until you have paid anywhere between 5% and 80%. The balance is due when the keys are turned over. Let’s walk through a sample deal to show how leverage works when buying preconstruction. You purchase (preconstruction) a $500,000 condo with a 10% down payment. The balance is due on completion in two years’ time. A 20% increase in price during the build period means a 200% return (net of fees) if you were to flip. Of course, leverage, like buying an option, can work in two ways; a 10% fall in price means that you are down your entire investment. Preconstruction as part of a wealth accumulation strategy Buying preconstruction can be a great way to accumulate a rental portfolio. Capital appreciation can mean that at closing, a bank will lend based on the new valuation, not the price you paid. This can mean that you can pull cash out of the property the day you pay for it. I’m using preconstruction as part of a medium term wealth accumulation strategy in Fortaleza. When in the market cycle does preconstruction make sense? Buying preconstruction is a strategy that will maximize the retail investor’s ROI in the early-to-mid stages of a market appreciation cycle. Buy preconstruction at the top of the market and you risk losing your entire investment…and maybe even more than you have invested, if you are contractually bound to complete and that clause is enforceable. All the benefits of buying preconstruction are tied to a rising and active market. Without a rising and liquid market preconstruction almost never makes sense. If there isn’t activity in the market you run the risk that the project you buy into won’t be completed or if it does get completed half the building will be empty. This can be a big problem when it comes to maintaining communal areas or amenities and security.

Who is Preconstruction For?

Buying this type of property makes more sense for the investor than for someone buying for their own 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 have your actual unit in your possession, as long as the market is seeing appreciation.


Who may resell my condo?

You have two options in most cases:

  • The developer may resell the unit for you.
  • Tracey Schmitt, PA Group may find a buyer for you.

In either case there will be a real estate commission but this choice is solely up to you.

Why are preconstruction sales necessary?

Most developers are required by their lenders to pre-sell a certain percentage of their projects before the bank or lender will lend them the funds for construction. This is the risk (and the opportunity) when buying a preconstruction condo unit. If for some reason the developer decides not to build the project then your deposit money has not been appreciating. Preselling condos has become a standard practice. Once the required presale percentages have been reached and construction has begun, your risk is greatly reduced.

Why buy a preconstruction unit when I can buy one that is available now?

By purchasing at pre-sale you are able to leverage your down payment and control 100% of an appreciating asset with a small (20%) investment. Many people have purchased preconstruction condos and have sold their units for a profit even before the building is completed.

Why South Florida Preconstruction is a Sound Investment?

There are any number of reasons why investing in pre-construction real estate is something to seriously consider. I specializes in acquiring new condos for less than the usual cost in the market. My Priority is finding good deals on pre-construction at excellent prices in South Florida and you will be the owner of some of the most popular pieces of real estate in today’s market.

Pre-Construction is back, due to an increasing demand for homes created by the lack of construction over the last 5 years and the positive population growth. All of Miami-Dade and Broward Counties have been experiencing tremendous real estate development in every price range in the market. New construction projects, commonly referred to as pre-construction condos are rising in every community from Hollywood Beach to South Beach, Downtown Miami to North Bay Village, and Brickell Avenue to Dadeland. People buy in Florida for several reasons, some of the most popular are: investment, retirement homes, vacation / second homes, corporate housing.

There are many different types of buildings; ranging from two to three story buildings to 70-story waterfront high-rises, ocean front luxury condo-hotels to affordable suburban mid-rise projects. I am committed to help you sort through the hundreds of potential South Florida pre-construction real estate opportunities to find just the right situation to fit your specific goals and budgets. For that reason, we will answer all of your questions, and explain the advantages of buying pre-construction, so you can take advantage of the growing South Florida Real Estate Market.

One of the main reason why pre-construction real estate is something to consider as a smart way of investing is the lower initial price, and the possibility of almost paying the entire property over a period of time. Pre-construction real estate usually has a lower initial value than what the condominiums or property will be worth after it has finished. This allows you to place yourself in a very good position for the investment point of view.

The best time to invest in pre-construction is usually at the beginning (reservation phase). That is usually when the best deals are offered and you usually end up with a greater opportunity at a much lower price.

Contact us today for more information about upcoming pre-construction projects and how to buy them.