Investing in Real Estate – Purchasing Residential New or Pre-Construction Homes for Investment

One way to invest in real estate is by purchasing new construction or pre-construction residential homes. This is a highly lucrative way to make profits quickly. Many times your home will increase in value before it is even built.

About ten builders are responsible for over 90% of the new homes built in the United States each year. These builders usually announce when and where they intend to build a new tract of homes well in advance of ever breaking ground. They are looking for areas where there is growth potential in terms of population, marketplace appeal, and ability to buy. They spend many millions of dollars for research to find just the right areas across the country before they begin building. As an investor you can profit from this extensive research.

When a home builder first announces to the community that they intend to build a specific number of homes in a particular area they generally hold an open house for all perspective and potential buyers to attend. Realtors are also invited because it is typical for the builder to offer a 2-4% commission on any homes that are sold through the area realtors. They will set up a sales office where you can see the artist’s rendering of the homes that will be built, as well as see brochures showing the floor plans and options that will be offered. Try to visit the sales office quickly so that you can be among the first to choose a floor plan, model, and location that you may be interested in purchasing.

The builders often will offer sales concessions to the first buyers to commit contractually to purchasing one of the new homes. These concessions may come in the form of money towards closing costs, a buydown of the interest rate for the first 2-5 years so that the payments will be more affordable, a credit towards landscaping or home furnishings, or other creative means. Their goal is to sell as many homes as possible during this early stage so that they can develop more projects in either the same or other areas. You benefit by having the first choice of model and location within the new development.

If you do not intend to live in the home you must find out what the builder’s requirements are. They may ask you to sign an agreement that you do not rent out the home or sell it for the first year, or until all of the homes in the new development have been sold.

Purchasing new residential real estate is a smart way to invest for several reasons. You will be buying in a brand new neighborhood and be able to choose if you want a corner lot, cul-de-sac location, or an interior lot. You will also have the choice of building materials, such as ceramic tile, granite, cabinetry, and type of flooring. The color choices will also be yours. As the original buyer you will also be able to choose amenities like fireplaces, balconies, extra bedroom or den, and other things that can be changed before the home is actually built. These new homes also typically come with a home warranty, up to ten years, that covers just about everything except for light bulb replacement.

It is always best to conduct your own research about the builder’s reputation for quality and completion time. Find out if there will be a homeowner’s association and what the monthly fee will cover. Also investigate the neighborhood itself to see if this is where you will want to live or own a home for investment. Check directly with the neighborhood schools to see where the children from these new homes will be able to attend.

As building gets underway visit regularly to see the progress that is being made. Wear your old clothes and shoes because the streets may not be paved yet. You will want to walk around and go into the homes as they are build, but be sure to get permission from the construction foreman. They will most likely require you to wear a hard hat when walking close to the homes and may not allow children to accompany you for safety reasons. Follow the rules set forth by the foreman so that you will always be safe and not get in the way of their work schedule.

Purchasing residential real estate that is new or pre-construction can the path to profits for you, while also helping the country’s overall economy. Do your research and investigation and then buy the home that you have helped design and plan.