Preconstruction Investing

Now here's a sensible idea about preconstruction investing. There are a number of potential problems and pitfalls in the entire practice itself. When things go well very good profits can be made, when they go badly it can be the most almighty mess: that, of course, is why the profits can be high for there is the risk of things going badly.
Essentially the idea is that you buy house or property before it has been built. This gives the builder the capital to go and build it without needing to borrow: thus the house itself should be cheaper.
However, horror stories abound of people making those prepayments and either the project is never finished, or the builder goes bankrupt, or other things mean that matters don't turn out to rosily.
This good idea is that one should join one of the investing clubs. By doing this, by taking a fractional interest in a number of different projects (rather than 100% in just one) you are spreading risks. As in classical financial theory this should mean that you get slightly lower returns, but more certain returns: less profit perhaps, but a lot less risk of it all going horribly wrong.
There's an interesting ebook on the subject here.
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