Tens of thousands of amateur investors bought into the "spec-home" hysteria during the heyday of the real estate boom and built huge luxury homes. Building a house "on spec" ("spec" is short for "speculation") means that you purchase a piece of property and build a house on it that you believe will sell quickly… at a huge profit.
A friend of mine built such a house (and acted as the general contractor) on an oceanfront lot not far from where I live. He worked on the house for about a year and a half. One problem he encountered was finding reliable, quality-conscious workers. He hired as many freelance carpenters as he could get his hands on. His house was finally finished… but it’s been on the market for almost two years!
Though there may be some exceptions (in Vienna, VA, Orlando, FL, or Las Vegas, for example), building spec homes is a fool’s game in today’s market. You could easily be left holding the bag.
There’s an old adage in the financial markets: "The trend is your friend." Well, the same holds true with real estate.
One recent trend is toward smaller homes and apartments in the "new exurbs" – and that’s where your real estate money should be invested.
What the Heck Are the New Exurbs?
* The new exurbs are typically three to four hours (or more) from major metro areas. They have access to clean water and dependable utilities. The new exurbs are typically not an easy commute to a big city. The new exurbs are not the suburbs!
- The new exurbs have an educated population that is generally tech-literate. There is typically a concentration of ex-corporate professionals and entrepreneurs.
- The new exurbs tend to have quality restaurants, small museums, and entertainment (but obviously on a smaller scale than in the big cities). And in the best-case scenario, there will be a private or municipal airport nearby.
- The new exurbs are almost always clean, quiet, and scenic, and often border national or state parks.
Some examples of the new exurbs in the U.S. :
- Telluride, CO
- Laconia, NH
- Coeur d’Alene, ID
- Sedona, AZ
- Hilton Head Island
- Jackson Hole, WY
- Marshalltown, IA
In Canada :
- Mission, British Columbia
- King City, Ontario
- Airdrie, Alberta
- Carleton Place, Ontario
- Leduc, Alberta
- Vancouver Island
I’m not talking, here, about developing spec homes in those places. As I said, that’s a fool’s game. I’m talking about buying existing properties in the new exurbs that you sell or rent to the people who are flocking there.
The idea is to find small (two- or three-bedroom) homes, apartment buildings, or lots that are not overvalued.
If you can find properties below market value that can be easily updated – that’s even better.
Another strategy would be to buy modular homes or apartment buildings that could be used as long- or short-term vacation rentals.
Where Do You Find These Gems?
The trend toward investing in real estate in the new exurbs is still young. But it will pick up steam as people continue to exit the large metro areas and suburbs.
Properties that can be bought below market value will usually be bank-owned or have highly motivated private sellers. They won’t be easy to find. But, generally speaking, you’ll have the most success if you look within a few miles of the center of town.
Start by investigating the new exurb areas that are most appealing to you. A great "instant properties check" tool is Intelius.com (a fee-based service). Trulia.com is another hot tool.
Once you’ve targeted a few neighborhoods, set your New Exurb Real Estate Strategy – and go! The new exurbs will prove to be the next big thing in real estate.
[Ed. Note: Marc Charles, "The King of Business Opportunities," has launched more than 40 profitable businesses in the last 25 years. If you're looking for more ways to earn extra income, Marc's weekly Profit Center Dispatch service reveals some of the hottest business opportunities around and how you can get started. Marc also includes insider tips to accelerate your success.
To learn more about wealth-building strategies - including investing advice, entrepreneurship opportunities, and real estate investing techniques - check out ETR's "Profits in Paradise" Wealth Building Summit this April. For more information, click here.]
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