New Construction Investment in Peyton, Colorado

[Darren Smith]

I have an opportunity to invest in a new construction build in Peyton, Colorado. It's a hot market next to Falcon where there are lots of new homes selling for $300,000 to $600,000. The numbers on the deal are $162,000 invested in an escrow account. It's paid out in four installments over the 3 1/2 months it takes to build the home. When the home sells I get $192,000 back for an 18.5% ROI. The list price for the house will be $229,000. The neighborhood is a nice small area very close to schools, grocery stores, and a main road to drive to Colorado Springs. The other positive is that the builder has build over 1,000 homes in the area but went bankrupt during the downturn. I visited two of the homes he's just completed and they are both very nice and something I would like to live in.

My question is, what is a good ROI for investing in a new construction project? Is 18.5% enough for such a long-term project? If I was able to turn two homes a year that would be a 37% ROI. Also is the $229,000 list price high enough above the $192,000 payout amount? I'm completely new to new construction, so any advice would be helpful.