Flipping In A New Development
Hello,
I live here in California where home prices shoot up $10,000 in the time it takes to sneeze.
I've noticed a phenomenon in the many new construction developments in my area: they're all sold out in a matter of days. In fact, they have long lines waiting to get placed on a list just for a shot at a lottery that would put them on a list for a new home.
To give you an example, a home in Phase 1 of a new development may have a base price of $550,000. All are sold out. Before Phase 1 is finished, Phase 2 is now accepting offers on planned homes. The base price for the exact model of Phase 1 is now $625,000. The time frame between Phase 1 and the start of Phase 2 is about 4 months.
Long story short, in all new developments I've looked at, getting in on Phase 1 means that you've made anywhere from $50k - $75k or more BEFORE your house is built (from the time you sign the purchase agreement to the time you actually move in is about 6 to 9 months.).
This greatly interests me and I'm wondering if anyone else out there has experience in investing in new development appreciation?
Thanks in advance.
the hardest part is getting your number picked. I was phase 2 in a development of only 36 homes. They ended up having 6 phases and there were over 300 people waiting to buy 6 or so homes each time. We bought for $568k, oct 03, housed completed april 04 and we sold at full asking price of $739k in June 04. Escrow is scheduled to close aug2nd, needed to keep loan 90 days to avoid chargeback of commission. My greedy neighbors 6 of them have had their homes listed since may and none of them have sold. They were asking prices of $879 to $799k, and have since all lowered their prices. Moral is don't be too greedy and you can do well (for now) on the new construction speculation.
Hi,
This is my preferred way to work with investors. I just stay on top of who's in Phase 1, Filing 1. I haven't been in a lottery situation in 5 years, but even when it is slower, there is great equity to be made. My clients usually buy around $200,000, do a lease/option for a year and sell around $250,000 in a 1031 exchange. Avoid capital gains, get great renters who invest in the property, and make enough on 1 house to put 20% down on 2 the next year. I only know of 2 builders in my town who don't sell to investors. Just double check that Phase 1 pricing, some builders start a lot more aggressivly than others. If you're planning to hold for a while to do a 1031, look for low down, interest only loans for great cash flow! Make sure you have $ in the bank to cover some payments. Also good to hold onto property until the builder is out of there for best equity in most circumstances. Look for neighborhoods where things that will boost your equity will be added later- like a parks, trails, ect. Buy before they're in and sell after. The first property I did this way I bought for $180,000 and sold a year later for $300,00! It got me hooked!
how can i wease out of a contract that I must occupy the property? or hol dit one year before selling... that kinda of crap?
since when can a developer tell you what to do with your property once u own it?
Quote:
On 2004-08-09 22:46, acucu wrote:
since when can a developer tell you what to do with your property once u own it?
When you sign a contract that says as a condition of buying the property you agree to the condition.
You can still sale the property but you could wind up in court with the developer and or the home owners assosiation saying that you have lowered property values and as such they are now seaking damages.
That said if you had an extream hardship I don't see a jury going against you.