This morning I got a call for an opportunity on land and new construction. There's one reason I don't like to invest in new construction and that is because I see it as speculative. Land isn't my favorite either, and the two of them go hand and hand.
First, I like to have a very defined end to my investment. New construction opportunities have a few different variables that are outside the control of the investor, namely the municipality. I don't like giving the success or failure to a government official. The permit process can be variable for a new construction project. Oftentimes, the permit process for rehabs are usually rubber stamped; however, not so much for new construction. There are code issues, zoning issues, neighborhood politics, and all of that adds time to the project.
Next, I don't like the length of time for new construction projects. I believe this adds unnecessary risk to the portfolio. Short quick in and out projects are the best.
Lastly, this comes down to personal reasons, I don't feel comfortable taking over the project if needed. Since I've never built a house I'm not sure how to move the project forward. Of course I can get a builder involved and get some experts on the team; however, did you know when you foreclose you don't own the architectural plans? Those are copyrighted and owned by the borrower. What a nightmare and one that I'm not interested in getting involved with.