As the real estate market cools, the profit potential of home
ownership has cooled as well. Here's a strategy called "follow
the builder."
It is relatively easy to make a profit when you sell your home
if the market is rising sharply like it has been in most of the
country for the last three years. It becomes more difficult when
a hot market slows down. It's very difficult to make a profit on
the sale of your home when prices are falling.
Is there a way to be relatively sure you'll make a profit when
you sell your home? There is under all but the most negative
market conditions. In fact, I've seen young, energetic couples
use this maneuver multiple times when they don't even need to
move.
Follow That Builder
In many areas of the country, there are builders who build
hundreds of houses each year within a fifty mile radius of each
other. They build entire communities or are one of three to five
builders who build entire communities around big employment
centers. This present you with an important opportunity.
New Community
Builders will typically sell first phases of communities for
significantly less than later phases. On one hand, they need to
get the cash flow moving. On the other, it is harder to sell at
high prices because the community typically consists of dirt
lots and construction equipment. Put the hands together and you
have a great profit opportunity.
The idea is to get in on the first phase of the build out. You
will purchase the home at a discount, which gives you built in
equity. As the community is built up, you sell the home for a
profit at a higher price. While you're doing this, you keep tabs
on the builders projects and find another location where you can
do the same thing.
You'll end up living in each house for a year or more and
picking up nice profits along the way. The only real downside is
you have to move repeatedly.
Tax Consequences
I've seen this work well for a number of people who have done it
more than once. However, you need to be aware that generating
profit this way can have tax consequences. You need to discuss
your plans (including projected timing and profit potential)
with your tax professional so that you are prepared to deal with
any tax consequences.
About the author:
Raynor James is with the FSBO site -
http://www.fsboamerica.org -
FSBO homes for sale by owner. Visit our home buying page -
http://www.fsboamerica.org/buyer.cfm - to view and buy homes,
houses, condos, land and real estate.
