All Forum Posts by: Derik Kaiser

Even before doing all the work of finding property, checking on zoning, etc. I would gather the data for residential sales, pending sales and homes on the market for sale. Any real estate agent can give you that (their Multiple Listing Service tracks it for them) then I would segment the data into $15K pricing increments. This is what you are looking for:

1. Define size of each market segment - Number of units sold, dollar values, absorption rate (avg. time it takes to sell)

2. Size of homes (sq. ft.) selling at a particular price point.

3. Look for a gap in the market where the demand exceeds supply.

4. Identify housing style, amenities and newest construction practices for today's buyer.

*5. NOTE: Do not choose to build in any market that any one builder owns 50% of.

I have done this in every market I have ever developed in and have never built a house that wasn't sold 30 days prior to occupancy and I build in the spec end of the market. I let the market tell me what, where, and how quickly I need to build a project.

When you assemble your game plan (business plan) with information as detailed as this it is very valuable and you should not casually give it out. Treat the information as talking points (I even have had Realtors and builders try and by the info from me) until you identify all the players on your team (I mean a builder, agent or others you may want to work with). The reason your newly assembled and correctly interpreted data is valuable is because it is bankable! You have minimized the risk by removing much of the speculation in real estate.

The knowledge you have about your market is by far more than anyone else has. Recognize this and don't second guess yourself - builders, Realtors and others in real estate may have more years experience but you KNOW the market.

Good luck!

 I have done many new construction projects without buying the land first but having the land seller subordinate his position to the bank. I often offer full price (or even a premium) if they will subordinate but a discounted price if I have to pay cash.

Contact your local Economic Development Council group and/or city officials to see where the opportunities may be. Ask what companies they are pursuing. They probably won't tip their hat and tell you a specific company but maybe you can find a way to work together.

My experience has been that about 70% of most investors decisions are based on the quality of the team. A great pitch with a marginal team won't get money but a great team can fund a mediocre project. - Good luck!

You say nothing about the absorption rate of $300K homes. Without complete interpretation of the market, you could choose a price point that has a reason others are not building in. Even if you find there is a need and a reasonable absorption rate that meets your needs, there are many other things to consider - like making sure you build what the market wants. Too many home builders pigeon-hole buyers into designs they are comfortable with and not consumers. Make sure you are making decisions based on data and not opinions.

Tip: You don't have to tie up your money buying the lot or lots.

Learning to read real estate markets has made all the difference for me in earning money in real estate over the last 35 years. The market can tell you:

What - what type of property to invest in.

Where - where geographically is hot or not.

How - which strategy is the best at this time.

If - if you should change you focus or strategy or . . .

After all this time, I don't allow myself to get pigeon-holed into any one investment strategy but I do have my favorites. I am currently looking to do another single family development. WHY? Because the market is screaming for it!