Unfortunately, one of the inherent problems of buying pre-owned homes is not knowing exactly what you’re buying. No matter how good the inspector was that you hired to inspect the home before you bought it as an investment, the chances of a costly defect is always an ominous occurrence waiting to happen. However, when completing the purchase of a new tract home, even though the home may have a defect or two, the defect is correctable most of the time, if not all the time. This is accomplished through the built-in home warranty that comes with a home upon its purchase. More often than not, national, regional, and local builders have some type of warranty that covers even the smallest of defects, such as cracked tile, masonry work, squeaky floor boards, and caulking issues, or major issues, such as pipe leaks, roof problems, foundation cracks, and other structural issues. Structural issues may include a ten-year warranty to cover costs related to the defect. Generally, warranties are defined as standard and structural, as most major homebuilders provide these warranties, such as KB Homes, Centex, and Pulte Homes.

And yet, despite the coverage that most warranties will provide for a pre-owned or resell home, such as the warranty you can buy for $350 to $450 from Fidelity or Old Republic, nothing beats the comfort of acquiring a new home that has that bumper-to-bumper warranty coverage and still has that new car smell to it. Other negatives of pre-owned homes include the following: mold issues, termite infestation, hard to detect structural damage, and cracked foundation or slabs. It would be very rare for the latter issues to arise in a brand new tract home. These are only a few of the problems that may occur with pre-owned homes since there may be many more.

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Deciding where one will farm his market can be approached in a myriad of ways. Presumably, where one lives in the United States usually sets the cornerstone, and the rest follows. For example, someone living in Florida may prefer to concentrate their efforts in the Southeast region of the United States, as opposed to someone in the Northwest who may find the Portland or Seattle markets more to their liking. It could also be said that the market itself will dictate where the activity is, and as such, someone living in Iowa City may find themselves looking at markets that are far removed from where they live. Many speculators, investors, and flippers will literally travel to the ends of the earth to penetrate a market to initiate flip candidate opportunities. You might call these people equal-opportunity flippers. Being a plane ride away is no obstacle for a truly dedicated investor who enjoys the hunt as much as the chase.

In terms of preliminary market research, I recommend focusing on markets that offer the most apparent upside as deemed by bona fide news accounts and real estate data. As a web source, try HomeBuilder. com and NewHomeSource.com to start out. Both of these sites will give you access to all fifty states and developer activity in those respective areas in terms of specific builders, sites, locations, and cities, and what type of homes and how many homes they are building, and the prices. You should also utilize the myriad of Web sites that offer for free in some cases, lists of preconstruction opportunities in various parts of the country. Just type the key words into a search engine, and off you go. In terms of a fee-based membership, don’t shun those services too quickly. Organizations like NREIA (National Real Estate Investment Association) and REIClub (Real Estate Investment Club) are well worth the nominal sign-up fee. I can’t understate the importance of leads, leads, leads!

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1. Look for high appreciation markets. Your market data research will make this very evident. The highest “Top 10″ or “Top 25″ appreciating markets in the country will on average change every four to five months.

2. Pick the early build-out phases of a development. For example, try to buy in phase 1, phase 2, or phase 3 versus the later phases. The earlier phases, for obvious reasons are usually priced slightly lower to generate activity. Also, there can be times when the later phases are capped off at the perceived value of the homes and, as a result, create an artificially high benchmark, irrespective of what the market dictates. As a tip off, adjacent communities and developments are usually a good way to check the comparative value, as to whether or not that particular developer has priced their home at, under or above the market.

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