End of FY Deal on a New-Construction

[Robert Johnson]

Investment Info:

Single-family residence buy & hold investment in Vail.

Purchase price: $377,000

5/3 new-build in a Tuscon suburb. Originally listed for $420k but dropped to $390k so the builder could sell before the end of the fiscal year. The appraiser worked in our favor by taking seller concessions off the purchase prices of the comparable properties and only comping 4-bed homes, bringing the price down to the $377k appraisal which the builder didn't have time to refute. In addition to the price reduction, the builder also covered a rate buy-down to 4.99% and all closing costs!

What made you interested in investing in this type of deal?

Work moved us to AZ and we needed a primary residence that will turn into a rental when we move in about a year.

How did you find this deal and how did you negotiate it?

We were originally looking in Sierra Vista, AZ, but our agent heard about this property in Vail, AZ. We went to look at it within an hour and had it under contract by the end of the day. It was a new construction at a good price and great incentives/concessions so there wasn't much negotiation room, but our agent was able to get them to include window coverings.

How did you finance this deal?

0% down VA loan at 4.99%. The builder bought the rate down for us and paid all closing costs.

How did you add value to the deal?

Before it becomes a rental, we will landscape the back yard. Otherwise, the place is brand new!

What was the outcome?

Time will tell! The projections don't show much for cash-flow for several years, but even conservative numbers estimate great long-term numbers. We both still have stable W-2s, so we're primarily investing for the long-term rent and value appreciation. We're pretty sure we bought about $20-30k in equity, so that's a good start!

Lessons learned? Challenges?

If you want a new build, try to time it at the end of the fiscal year when builders are trying to offload their available inventory. This helped us get $40k off the normal list price and other incentives.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Josh Berkley at Keller Williams in Sierra Vista was the best agent I've ever worked with. He was fantastic and really had an eye for good investment properties since he has several himself. We originally were looking for semi-dingy properties that we could add value to (that would still pass the VA livability inspection), but the numbers on this new build he found drastically outshined anything pre-owned that we could find.