Investing Through New Construction

Author: Heather Sei Tz

If you think that because the residential real estate economy has gone bust that there is no way to make money in this market right now, think again. There are thousands of upscale neighborhoods across the United States in which new construction of homes was halted because of the collapse of the real estate market. Most of the homes that were under construction had been purchased by real estate investors who hoped to flip the home upon completion to a new buyer and make a sizable profit.

When it became apparent that the majority of people who were commissioning new construction homes to be built were investors and there were not a lot of buyers, the entire market crashed. Investors lost money and many developers went out of business. They had a lot more homes in their new subdivision for sale than there were buyers. On top of that, they owed banks money for financing the subdivision. Pretty soon, banks took over these areas, which are located throughout the United States and particularly in Florida, California and Nevada. These areas were booming in the 1990s and then crashed.

There are many homes in these upscale neighborhoods that are in the process of construction. When the builder went bankrupt, the construction was halted. Banks took over but have no interest in getting these properties constructed. They are simply looking to get their money back.

If you know about new construction or are in the trades, you can buy one of these partially constructed homes for a fraction of their cost and finish the construction yourself. You have to be careful, though, that you understand what you are getting into.

You will have to know about building codes and make sure that the home is completed in accordance with the codes. In addition, you should also be aware that some municipalities have ordinances that require that construction be completed within a specified amount of time. If the house has not met that specification, there may be fines associated with the property. A title search will allow you to discover if there are any fines that have been levied against the property from the municipality for non completion of construction.

In addition to doing as much of the work on your own, you can also find labor relatively inexpensively throughout the United States. The trades were hit hard during this recession and there are many people who are experienced in all aspects of home building that are out of work. Many small trade companies have even gone out of business. You can find cheap labor to help you finish the construction of your house.

Buying new construction is usually a way to make money in real estate during any type of market. But even in this recession, you can buy partially constructed homes, finish them and then get ready to sell. Although you may make a small profit selling the home after construction is completed, you can make an even larger profit if you look for the long term investment and wait until the market turns around.