Thanks to all of you for the warm welcome. I look forward to learning from you and hopefully contributing positively to all of your knowledge.
We have seen a substantial increase in pricing of homes in many areas across the U.S. Wages have usually not kept up with the pricing increases. Becasue of this (and other factors), most housing prices have stablized or even dropped dramatically in most areas. This makes the pre-construction play from an investors standpoint a lot more difficult. While pre-construction should become a viable investment again some time in the future, we have found that pre-development in specific baby boomer markets works very well.
In pre-development, purchasing is often done when the developer is in the early stages of developing the lots. With enough buyers coming in, it allows the developer to save significantly on marketing costs as well as not needing to bring a JV partner in with cash.
With the right deals structured, the developer shares those savings by granting significant discounts for the purchases.
Thre are of course many more factors that come into play. You need to be sure that all bonding is in place (this assures completion of the infrastructure should the the developer be unable to do so for any reason). You want to be in markets that have potential for hyper-appreciation as well. You want to be working with seasoned developers - not first time developers.
Many more things come into play. But, pre-development, done right, in the right areas, has tremendous potential - especially in the baby boomer market for 2nd homes/vacation homes that looks to continue for years to come.
