Flipping Near New Construction/Spec Homes

[Brian Lusk]

Hello All, 

Please excuse the long post, but I want to make sure I get out all the info on the front end.

My question is in regards to flipping a house very close to a lot (10+) new construction/spec homes. What effect will the newly built homes have on the ARV of the home I may chose to flip? Will they lower the ARV of my house because new (and maybe nicer) homes are being built on the same street? Or will is pull my ARV up because they are in fact luxury homes? I would be flipping my house as close to the level of the new homes as possible as far as options, finishes, etc. Does anyone have any experience in flipping in the middle of a ton of new, and luxury, construction?

This is in a part of town that is considered to be "posh" or "trendy."   The new homes being built on the same, and surrounding streets, are all roughly the same size as mime, and would be considered luxury homes.  They all have very good finishes and options.  Far from "cookie cutter."  They are selling for a very good price per sqft for Memphis, around $140-$160/sqft.  They are all about the same sq footage (2200 sqft +) as the home I am considering.  All selling in the mid to upper $300's,  around $375k to $390k.

The house I am considering was built in 1920, the original time when this area of town was developed.  The home does have some updates such as some paint and flooring, but there is much more I could and would add.  The asking price is $205,000  ($93/sqft), which is slightly below current market value.  The seller has lowered the asking price $85k over the last 2 months and I am hoping they are very motivated.  Again this area of town is one of the only trendy parts of a city that is mostly "blue collar" and great of cash flow.

  I am not sure if the new home sells have already affected the market value of the home in question, or if there is more room to go up.  I know it is a very bad idea to bet on appreciation, and I will not be doing so.  I absolutely will only pay what I feel comfortable with, and will not fall in the trap of relying on having to get a top sells price to make a profit.  But as I determine what I could offer on the home, I was hoping for some help from everyone on how to figure in, or judge, all the good new construction going on.

Thanks for you help!