Thursday, January 2, 2020

Investing in New Construction

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.   

No comments:

Post a Comment

I'd be delighted to consider your comment for posting