Investing in a new built

[Anne Edouard]

We are looking into investing in a new build home and renting it. There are several other new contraction homes company's in the neighborhood and the average rent in the area looks good. I don't know much about the process. My understanding is I purchase the lot and start mortgage payments once the house is built. Help!

[Greg Dickerson]

@Anne Edouard the first thing to do would be to talk to some local builders, realtors and lenders to get educated and prequalified on the process, market, costs and demand. 

Once you determine there is sufficient demand and the numbers work you can either buy a new construction home in a new subdivision that is complete or under construction. This would be the easiest way to do the first one.

If that’s not an option then the process would be to find a buildable lot, put it under contract contingent upon ability to build what you want, choose a builder that has stock plans that will work or need minor modifications or design a house custom for the lot. 

Once plans, specs and contract are complete you send to the lender to start the process of securing a construction loan that converts to a permanent mortgage when finished. 

The construction loan will pay the balance of the lot purchase after your down payment if there is one and then fund the construction.

You will need to be able to put up the down payment and pay interest payments as the house is under construction or you can build an interest reserve into the construction loan. All depends on the lender.