Investing in Residential New Construction

Investing in new home construction has often been the safest, easiest way to make money in the investment real estate market. During the real estate boom when new home construction was in high demand, simply placing a down payment on a new home meant the investor would reap all the profits generated by builder price increases. It was not uncommon in 2005 for builders to increase prices an average of $5,000 per month or more, and still have buyers waiting in line or participating in a lottery to obtain the rights to buy one.

Unfortunately, for investors at least, most home builders decided they no longer needed to sell to investors to reach sales goals, so they took steps to keep them out of the market. In some subdivisions investors were limited to a percentage of total sales, while in other communities builders required all buyers to sign an occupancy agreement that would eliminate most of their profits if completed homes were sold in less than one year.

As the market changes, so do the builder's rules and many are once more welcoming investors. The months where $5,000 price increases were easily absorbed in the new home market are a thing of the past, however.There are some opportunities out there, but it is a question of which one is the best for you.

Occasionally a builder will offer a model home for sale, and will agree to lease it back for one or more years, usually at an annualized rate of 8% of the sales price. Homes are awarded through a closed bidding process, and your Realtor should be able to assist you in locating these if interested.

New home investing is no longer the way to guaranteed future profits, but is still worth keeping an eye on.

• Why Most Real Estate Investors Fail

• The Most Common Mistakes People Make When Buying a 2nd Home

• Investing in Residential Rental Property

• Investing in Land & Vacant Lots

• Investing in "Fix & Flip" Opportunities

• Commercial Real Estate Investments

• Investing in Apartments & Multi-Family Homes

• How to Eliminate Risk in Real Estate Investments

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