Real Estate News & Commentary

Opportunity in New Construction

Expertise: Real Estate Investing Basics, Landlording & Rental Properties, Real Estate News & Commentary, Mortgages & Creative Financing, Real Estate Wholesaling, Personal Development, Flipping Houses, Business Management
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With the quick rise in home prices, we saw an opportunity early this year to snatch up a few developed single family lots in anticipation of a new construction boom. Over the course of just a few short months, it was as if everybody saw the writing on the wall and starting grabbing developed lots at an unprecedented rate. In Atlanta, the supply of developed lots has been reduced significantly and the number of new construction starts is increasing by the month.

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According to the National Association of Home builders, residential construction spending is increasing almost every month and is currently 17.2% higher than a year ago. In fact, it’s currently at its highest level since September of 2008! If you’re in the home building business, this is probably music to your ears.

Successful First Attempt

While my primary business is buying and fixing distressed real estate, we decided the current opportunity in new construction was too great to let it pass by. We are actually on the cusp of finishing our first new construction house (picture above is the actual property) and have 5 more about to get started. With our first new construction project, we were able to snag a remaining lot in an already developed neighborhood. We are still about a month away from completion , but decided to put it on our MLS system last Friday just to see what kind of activity we would get. Interestingly, we had a full price offer on the property within 24 hours … on a house that’s not even completed yet!

In my opinion, this confirms what some of the experts are saying in regards to a “pent up demand” for new construction housing. Even with interest rates beginning to climb, buyers are ready to buy new construction properties and builders are just beginning to meet this demand.

Don’t get me wrong. I’m not suggesting that investors go out and start building houses willy-nilly. But, if there are developed lots that make sense, and you can find a reputable builder to manage the project, it’s not outside the realm of possibility to make money in new construction. For those investors that have managed large scale renovations, building from the ground probably doesn’t feel that far outside of their wheelhouse.

I’d be curious, any other readers out there that have tried their hand at new construction recently?

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.

    Michael Woodward
    Replied about 6 years ago
    Thanks for the article Ken. I hope you’re tremendously successful with your new construction. I started building new houses in 2004 but just barely got out in time for the collapse in 07-08. After experiencing the financial devastation of that era, I’m wary about the current surge in new construction. I’m definitely staying out of new construction until I see the volatility level out and economic fundamentals improve. The biggest concern I have right now is the stubbornly high unemployment rate. I don’t think the patient is ready to run just yet. My two cents…….
    Ken Corsini
    Replied about 6 years ago
    I can understand being cautious about new construction … especially knowing first hand how many builders got burned. I certainly wouldn’t go out and start building a ton of spec homes just yet …. but doing one or two at a time and waiting to see how the market responds probably isn’t a bad idea.
    Chad Lubke
    Replied about 6 years ago
    We are in the process of doing the same thing in the Tampa Bay Area of Florida. There are many buyers that want “new construction” and for the most part here the newest product was built in ’07
    Sharon Vornholt
    Replied about 6 years ago
    Way to go Ken! Keep that momentum going. New construction seems to be gaining speed here in KY too. Sharon
    Ken Corsini
    Replied about 6 years ago
    Thanks Sharon … looks like new construction is starting to pick up in a lot of places.
    Ken Corsini
    Replied about 6 years ago
    Thanks Sharon … looks like new construction is starting to pick up in a lot of places.
    Jeff Brown
    Replied about 6 years ago
    A couple of investment buddies and I have recently provided significant startup capital for a new construction firm in Texas. We see the same thing you do. 🙂
    Ken Corsini
    Replied about 6 years ago
    Thanks Jeff – I can definitely imagine Texas is a hot market for new construction right now. Reply Report comment
    Ken Corsini
    Replied about 6 years ago
    Thanks Jeff – I can definitely imagine Texas is a hot market for new construction right now.
    Karen Margrave
    Replied about 6 years ago
    Ken, we do new construction too, and have for close to 30 years. We live in Orange County, CA, having relocated here after the market crashed. We are just getting ready to start another spec house in San Clemente, CA. We close on land next week, and already have interest from potential buyers. The thing here in Orange County is finding lots that are actually buildable. Good luck in your endeavors! It looks like you’re off to a great start.
    Karen Margrave
    Replied about 6 years ago
    Ken, we do new construction too, and have for close to 30 years. We live in Orange County, CA, having relocated here after the market crashed. We are just getting ready to start another spec house in San Clemente, CA. We close on land next week, and already have interest from potential buyers. The thing here in Orange County is finding lots that are actually buildable. Good luck in your endeavors! It looks like you’re off to a great start.
    Julie
    Replied about 6 years ago
    Nice work Ken and another angle on this is to specialize in buying raw lots, improving them, and selling them to small home builders. I have a friend in the Northwest who does about 2 dozen of these a year and averages about $20k per lot flip.