Opportunity in New Construction

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.

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?

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.