My Real Estate Blog

It might sound a little surprising, but in investment real estate, residential lots are hot, especially in markets that saw the highest peaks and the worst busts during the past three years.

The reason: Home builders are now looking ahead to 2010 and 2011. They see the rebound already taking shape. And they need well-located lots ready to go for the future construction they're planning.

The best deals are bank-owned lots taken back in foreclosures from earlier, unsuccessful developers.  But be warned that rising demand - from builders and investors - is putting pressure on those prices.

In other boom-to-bust-to-rebound markets - Arizona and California for instance - similar land rushes are getting underway again.

Publicly-traded builders are scooping up developed lots by the hundreds in REO transactions and are then “land banking” them for their own building - or for resale to other builders or investors - in the coming several years.

In one recent sale, Communities Southwest bought 891 foreclosed single family lots from Bank of America for $8.3 million. A major land banker in its own right for the past two years, Communities Southwest now is marketing about 2,000 lots - primarily targeted at builders gearing up for better days ahead.

But there's an important factor to keep in mind if you're looking to invest in residential lots in the coming months: There is virtually no financing available for developed lots. So-called “A-D & C” loans - that's acquisition, development and construction - are few and far between from banks or other conventional lenders.

So buying lots at deep discounts - attractive as it may be -- is an all-cash investment activity. You go in with your own bucks. Or you partner with equity investors who know good timing when they see it.