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What Do You Mean the Builder Won’t Sell to Me?

By
Real Estate Agent with RE/MAX of Orange Beach

I market myself to real estate investors interested in a 50% bonus depreciation on residential rental properties along the gulf coast of Alabama and Mississippi. Yes, you read that correctly, it's a 50% depreciation. Investors are surprised when I tell them that new construction homes are limited in availability even when numerous new homes can be located on the MLS.  Now, to be forthcoming with information, not all builders in our area will even sell to investors looking for this tax break offered by our current government. 

Why not you may ask? Let's put it this way, builders have reputations among the people who buy their homes in any given community.  Our builders are no different, and want to uphold a reputation that is hard-earned and one that has possibly taken years to cultivate. If a builder gains the reputation of filling new subdivisions with "non-occupant owners' who have rented out to "non-owner occupants" who traditionally don't take care of the property in a loving manner, soon homebuyers will look to other builders and subdivisions for their personal home choices.

Some investors understand this and others don't.  Many have asked why a builder would refuse to sell to an investor when our president passed a law back in December of 2005 allowing investors to help rebuild the coast and gain a tremendous tax advantage for doing so.  My answer is simply.... Imagine a builder selling the homes neighboring your own and turning them into rentals.  How would that make you feel?

To improve your odds of making a residential rental purchase in time for 2007 tax advantage that won't be surrounded by rentals on all sides, don't wait until the final quarter of the year.  Buy now in areas where homeowners are also buying and not when the 'pickings are slim' in November and December and then worry about your competition for tenants.

That's my 2 cents worth.

Steve Dalton
219-465-8352 - Valparaiso, IN
Northwest Indiana Home Builder

Teresa, thank you for this insightful post.  Due to the fact that I build in Northwest Indiana, I hadn't even really followed this valuable tax advantage in your market.  I too have been saddled occasionally with this same problem though, especially in multi-family communities.  Frankly, investors like to buy ... but too many renters can spoil the neighborhood. 

As home builder and developer, I have to make that call and it's not easy to turn away buyers!

If you would add this post to Home Builders of American Group i would like to feature it.

May 15, 2007 05:44 PM
Kaushik Sirkar
Call Realty, Inc. - Chandler, AZ
It varies by location.  A good chunk of the las vegas boom was driven by investors (in the new home market).  In Phoenix, investors were locked out of a good chunk of new homes, so they bought tons of resales!
May 15, 2007 06:01 PM
Teresa Cox King
RE/MAX of Orange Beach - Orange Beach, AL
Orange Beach and Gulf Shores, Alabama

Steve-You are welcome to feature it to Home Builders of America.

Kaushik- Thanks for your comments. Resales won't do here for the GO Zone accelerated tax depreciation benefit investors are looking for. New construction is all I recommend for these buyers.  Too much gray area on getting a rehabbed dwelling to qualify for me to deal with anything but new.

May 15, 2007 06:33 PM