I’ve been trolling for a while, and see that there are many folks investing in pre-construction properties. I’m interested in preconstruction investing in planned subdivisions. I have currently closed one deal, am living in that property, and have seen roughly 80K in appreciation thru builder price increases in 11 months. I have an opportunity to purchase another lot in the same subdivision and write a contract for delivery in approximately January of 06.
I don’t think there is much risk to this, as the builder only requires a small deposit to start construction, and is imposing roughly 4-5K monthly increases along with 10-15K lot premium increases for each new phase of construction. The builder will not take an assignable contract, so I will have to close on the property then sell it or engineer a double close.
I have some concerns about this deal, number one is securing financing. Does anyone have a lender or broker they have dealt with on this type of deal(preferably who can lend money in VA)? I will have the financial reserves to hold on to this property for several months, which, in this market I think will be unnecesary. I have spoken to a real estate agent I have used in the past, and she brought up the issue of the appriasal at the second closing. Will a lender appraise the property at FMV so close to closing? I anticipate that the contract I write will be in the neighborhood of 450,000 with a FMV at time of closing of approximately 500,000-520,000. However, there will be relatively few comps to support that due to the fact that I will get in on the front end of the newest phase, and the “down time” the builder had in getting the newest phase approved. Do appraisers look at “contract price” comps for properties that haven’t been delivered yet?
Thanks for any advice.