Experience investing in building of townhouse condos?

[Scott L.]

Would someone have experience/advice on investing in the ground-up development of townhouses for sale as condos?

I've been asked to invest (equity) in the tear-down of an old house, and development of six, 3-floor condo units on the property. Demand seems strong for condos in this neighborhood. But I'm unfamiliar with the dynamics of this type of investment:

- Are the first units harder to sell and buyer-finance, because buyers and banks look at occupancy to cover HOA costs?

- Does the investor have to keep up homeowner's association fees for any unsold properties?

- I assume builders+investors can rent out a unit if it's not selling. Is positive cash flow an increased problem since the investor or rentor are contributing to common HOA costs but not getting the benefits.

- It seems like these are more risky as a project, because built-in equity disappears when the old house is demolished, and new equity depends on the builder delivering on time and budget. What special contingencies would I put on the builder/deal?

If you like building townhouses-condoss an property class, I'd welcome the chance to ask a few more questions. Thanks a million (or a thousand)...