Why Developers Charge Greater than Current Market Prices, and How can You Benefit From This?
© by M. Mitch Freeland
Is government meddling the cause of high real estate prices? We all know that Developers need a large amount of capital to complete a project. We also know that much of the money used is borrowed. Construction loans are common and all builders use some type of financing. When local governmental planning departments levy heavy requirements of cash reserves on developers, it usually takes longer for the development to be completed and prices are generally increased on the real estate being built. Usually, the longer the project takes to develop, the greater the end price will be for the buyer. Developers will pass the cost burden onto buyers, and property values will typically increase in the general vicinity.
Because of burdensome requirements from building and zoning departments, developers have been forced to stretch timetables for completion of projects into the future. This long process costs the developer much in the form of interest payments, workers compensation, property taxes and a slew of other expenses over a long period of time. The only recourse for the developer is to increase prices to the eventual buyer.
Learn more about how government intervention increased property value and where investors could make smart investments get your copy of The Real Estate Hustle. Available at Amazon.
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