Purchasing new construction to resell upon completion?

[Ben Kirchner]

My wife and I have been tossing around the idea of investing in a new construction in a growing area where we live (Durham, NC).  The construction would not be complete until 1-1.5 years.  Therefore, the idea would be to lock in at the current price of the construction, providing a low cost initial investment.  Then, when the construction is completed 1-1.5 years from now, the price of these constructions would have risen, as well as values in the surrounding area.  We would then look to likely resell the new property.  

Has anyone done this?  It seems like such a simple strategy, but perhaps there are a handful of things that we are not considering?  

[Greg Dickerson]

Originally posted by @Ben Kirchner:

@Joshua Stewart I've looked at some new constructions where you lock in at a certain price, and that's the price you pay when you close, at the end of construction.  So let's say you lock in at $200k and the house takes a year to complete construction.  A year from now, the new constructions are being locked in at $220.  Therefore, I've locked in a $200k house with simply paying the down payment. So let's say I make a 5% down payment of $10k, don't pay a mortgage the whole time it's being built.  Upon completion of the house, I sell for $220k a year later.  Seems to simple, so I imagine there must be some things I've overlooking?

You will need to close on the house when it's complete and would likely have to put 20% down unless you are assigning the contract. Either way iIf you only sold for $220k you would only make $6k after commissions if you are using a realtor. This is way too thin do roll the dice on.