Pros and Cons of Buying Pre-Construction in Texas

There’s so much to love about Texas living, such as the fact that the state has no income tax and an incredibly low cost of living. A plethora of major companies have moved to tech hot spots in Dallas and Austin, while the gorgeous scenery will encourage you to get out and about to appreciate the sunshine.

With so much space to spread out, the Lone Star State is bursting at the seams with new construction opportunities in some of the country’s hottest markets. Whether you’re looking at property in the newest up-and-coming DFW neighborhoods or want something more rural, there are several advantages to buying pre-construction. However, it’s crucial to be realistic about the downsides to this market, as well. 

Today, we’ll examine the benefits and downsides of pre-construction options in the great state of Texas. 

You’re Investing in the State’s Future – And Your Own

First, let’s consider Texas as a market before thinking about pre-construction. 

One of the best ways to identify whether a market is stable long-term is to examine the investments of major companies in pre-construction. If construction has slowed, then this means investors don’t have faith in the market and are pulling out their funds. A hot market will have dozens of projects bounding up throughout the area, representing trust in its future.

 As a comparison, consider the dizzying array of pre-constructions available in sizzling Miami: it’s headed by some of the biggest names in nearly every industry, from fashion brands like Dolce & Gabbana to renowned hospitality brand Mandarin Oriental. 

These companies are privy to information that the average consumer doesn’t have; if they are willing to pour millions of dollars into creating ultra-luxurious condominiums such as the Residences at Mandarin Oriental, Miami, it’s because they know they can sell these properties. Miami’s market is breathtakingly hot right now due in no small part to the powerful job market and many major companies flooding into the area.

Similar pre-constructions are popping up around Texas, which also has a powerful labor market and massive investment. As an example, The Terminal at Katy Trail in Dallas has properties selling for $4 million and up, demonstrating confidence in these upscale markets.

Even if you’d like an apartment in Austin or elsewhere that’s a bit more affordable than this, purchasing pre-construction represents an investment in the future of your area. At the same time, leveraging the financial calculations of major corporations means you’re also selecting a winning option for your own future, as you can build equity and sell in a powerful market for plentiful returns.

You’ll Have Access to the Newest Innovations

One of the best parts of pre-construction is that they are at the cutting edge of amenities and design. For example, The Residences at Mandarin Oriental, Miami, will feature sustainable architecture and incredible luxury, like multi-tiered swimming pools, a spa, and a meditation garden in its 80,000-square-foot amenities platform.

The same delightful offerings are present in pre-construction projects throughout Texas. One such example is Tiara on the Beach in Galveston, with properties starting at over $4 million. This condominium will include a pickleball court, a fitness center with yoga studio, outdoor grilling areas, and a resort-style pool for residents to enjoy.

Perhaps the best part is that you will be the first to appreciate these indulgences, getting to see them at their very best before time has worn them down. 

Pre-Construction Does Come With Investment Risk

Pre-construction can be risky in some cases. For example, a Highland Park, Texas, condominium developer had to file for bankruptcy after a lawsuit alleged significant construction defects in the Mondara building on Abbott Avenue. Some of the condos, which were priced in the millions, suffered from cracked walls and water leaks. The condo association alleged that the developer, Stillwater Capital, did not get warranty and insurance information from the subcontractors, leaving residents scrambling once major defects emerged.

Like with any investment, it’s crucial that you carefully research the company performing the work and ensure that it meets the necessary standards. Review any materials about the pre-construction, such as whether the architect of record has a reputation for quality work and what kinds of projects they have completed in the past. Pre-constructions attached to major name brands, while not immune to shortsightedness, may take special care with their work because of the risk to their overall brand name if their condominiums are not of the highest quality.

Buying Pre-Construction Requires Significant Foresight

The most immediate downside of pre-construction, and one that must be considered for certain buyers, is the fact that many of these projects will not be completed for years. If you’re purchasing a pre-construction for personal use, such as for a vacation home, you may find that life circumstances have changed significantly by the time you’re ready to take ownership of your new home. Perhaps you added a new family member or got divorced; suddenly, you have additional strains on your pocketbook that weren’t there before. 

Climate change also contributes to this precarity for certain parts of Texas; Galveston, for one, has been facing intensifying hurricanes, while other areas are suffering from desertification. Political unrest and immigration may mean an investment is no longer as safe as it seemed when you first purchased the property.

Pre-construction is an excellent option for investors, but those buying as a second home may want to carefully think about where life may lead them in the coming years. While some issues are unexpected, be certain that you’re able to afford – and enjoy – the property even if some life circumstances change. It’s crucial to consider both the pros and cons of pre-construction in beautiful Texas before making the plunge.