Marketing: The Key To Your Preconstruction Investment ~ By Chris Anderson, Ph.D.January 1, 2006
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Imagine this. You have decided to invest in a preconstruction purchase by putting in a reservation. From everything you are hearing, the opportunity is looking great and they have already had two price increases from where you bought in. In addition, they very rapidly sold out 50% of the project so all lights are green for you to move forward and go to hard contract. Once the developer sells out the remaining 50%, you will have the option of assigning the contract through the developer's resell program and you can at least then recover your original investment while waiting for your profits at final closing. Perfect, right?
Possibly, but there is a piece of the puzzle that you may be missing. If you think about it, there is another 50% of the project that has yet to be sold. Unless that remaining piece gets sold, you are probably going to have difficulty selling, and profiting from your investment. If this project is going to be completely sold to investors (possibly a risky situation for investors), then you have to worry about all the investors trying to sell at the same time. If the final portion of the project is sold to non-investors (end users), then we have to think about who they are and how they will be convinced to buy.
Since we like projects not completely sold to investors, then we will concentrate on how those follow on sales will occur; immediately, some questions should come to mind:
1. Who Is The Follow On Buyer? - Is this likely to be a local buying a house or lot, Is this a 2 nd home buyer looking for a condo on the beach, Is this a .. You get the idea. Always understand who will buy from you.
2. Where Do Buyers Come From? - Frequently the first 20-50% can be sold off of lists of investors like we maintain here at GetPreConstructionDeals.com. Where do the other buyers come from?
3. Will the remaining units sell out ? - Often the first 20-50% of a project is the easiest to sell because it is sold to investors. After that point, many investors will no longer buy and then they buying decision for follow on buyers is completely different.
Even though the developer & sales team did a great job selling the first part of the project, did you know that they may falter badly on the second part? Even though this seems counterintuitive, it is simple to understand since investors and end users think night and day differently.
Once you understand who will buy out the remainder of the project (and also hopefully your investment), then we need to ask the second question: where will the second round of buyers come from? Here is the four major types of buyers and where they are found:
1. Local - Newspaper or local real estate agents.
2. Investor - Investment clubs, brokers, GetPreConstructionDeals.com, etc. Can lead to a large number of sales rapidly.
3. 2 nd Home Buyer - Magazines, shows (like LiveSouth), Mailers, calls to local brokers, drive in when visiting, etc.
4. Retirement Buyer - Similar to 2 nd home buyers.