Is the real estate early bird investment strategy making a comeback?
Over the years we have seen a number of real estate strategies and trends come and go, we have seen multimillionaires fall by the wayside and there is no doubt that property downturns have left many people financially crippled.
In the good old days before the 2008 US mortgage collapse, many people were making money on what is known as an “early bird investment” which was effectively the opportunity to buy an “option” on a property by putting down a relatively small deposit on a new development. The idea was that the value of the property would increase as more properties were sold on the development and the “early bird” investor would effectively utilise their option price and make a “turn”.
Did people make money off early bird investments?
We’ve all seen it, there is a new property development down the road but none of the properties have been sold and nobody is showing any interest. Everybody seems to be waiting for the first property to be sold and then this will in their eyes be a “rubber stamp” as to the quality of the project and buyers will start to flock. Many developers use the early bird strategy to bring on board investors looking for a “turn” from a new property in a new development. The idea being, as we mentioned above, as soon as the first for sale sign is taken down this would “open the floodgates” to new buyers.
Quote from PropertyForum.com : “The performance of real estate markets around the world have certainly been influenced by record low interest rates brought on as a consequence of the 2008 worldwide economic collapse. However, there are signs that some countries are looking to increase their interest rates in the short to medium term, what impact will this have on real estate prices?”
Prior to the 2008 mortgage crash many people were making good money with this particular strategy although as you would expect it fell by the wayside in the event of the downturn. So, is the early bird investment strategy making a comeback?
New developments popping up everywhere
You only need to read the financial press in Dubai, in Australia, in the UK and many other countries around the world. Housebuilders are reporting a major increase in interest, developments they mothballed after the 2008 collapse are now being brought back online and while it would be wrong to suggest that the early bird investment strategy is back, there are certainly reasons to think that it will return in due course.
Even if you have the best new property development in the region, there is no doubt that as soon as the first for sale sign goes down on the multiple properties available this will focus the minds of investors who have been “keeping an eye”. It is human nature, nobody wants to jump the gun, nobody wants to jump into the unknown and therefore many are happy to let somebody else take the risk, do their research and do their homework. If somebody else has taken a punt on a particular investment then it must be worth looking at?
Conclusion
The early bird investment strategy is one which can prove to be extremely beneficial if you pick and choose the right developments and the right deals for you. For a relatively small deposit, which sometimes you may need to walk away from and lose, you can benefit from early interest in a new development which could see prices squeezed higher. How successful you will be with an early bird investment strategy is anybody’s guess because as ever it is down to the quality of deals you can put together, the terms of these deals and whether indeed you are reading the national, international and local real estate markets correctly.