Track built houses- strategy to capitalize?

[Katie Sorensen]

Hello! We are heavily considering commissioning the construction of a new house at the beginning of a new neighborhood with the idea that as the neighborhood goes on, the builder will raise prices, and thus ours will appreciate. Once the house us done, We would either rent it for a year, or sell right away. I’m a realtor, which helps the situation. Does anyone see pitfalls to this idea? Ideas on best way to finance it - keeping in mind that the loan doesn’t even close til the home is done with production builders. Thanks for your thoughts!

[Michael Hacker]

@Katie Sorensen I would be very careful of an investment strategy that doesn't involve positive cashflow or the opportunity for you to add value.  This is basically a pure speculation play - it is very likely that it may work out as you are expecting, but I personally wouldn't like the fact that I have essentially no control over the opportunity to make a profit.  Also consider that if you hold for a year and sell, you may have to compete with the builder's new construction product.  Sorry I don't have more encouraging input - I watched a lot of people make and then loose a fortune with this strategy in Phoenix before the market crashed.  Good luck -