If you’re wondering how veteran real estate investors are looking at new construction for their flips instead of finding distressed properties and fixing them up, it’s a relatively easy process but only if the numbers work. That’s nothing new by itself, the numbers always have to work when investing insame home different values real estate but it does refer to a slightly different evaluation method.

This approach only works in specific markets but it’s something to keep in front of you the next time you run across a potential opportunity to buy an existing property.

Let’s put together a scenario. You have a set of plans and specifications for a four bedroom, three-and-a-half bath single family home. It’s brick all the way around, sort of a ranch style and sports a metal roof. You get quotes from a few good builders in the area and they’re all pretty much the same but the average price quote is $200,000 from start to finish. Lot extra.

Now say you build two of the exact same house with the very same plans using the same builder. Would you expect to sell the home for $250,000 for a $50,000 profit? Your immediate response is, “Well, that depends upon the location!” And that’s exactly the point. It depends upon where you build the home that will determine how much you can make. The same house using the same materials will cost the same to build but can have final values depending upon the neighborhood.

That house lying out in the edges of suburbia will be worth one amount yet the same floor plan in an older, established neighborhood experiencing a regrowth will be worth much, much more. That’s where investors are building new properties to sell or rent, in desirable areas where homes are selling for more based primarily on where they are located. The lot will cost more but will sell for much more.  Same house, big difference in profit.