This category of real estate consists of site built conventional
construction real estate single- family homes. They may be free
standing or they may be attached. These subdivisions are created from a developer purchasing
land, installing the infrastructure and then selling a lot to you.
Sometimes the lot comes with a house on it, and sometimes you
buy only the lot and then must go out and find a builder. The
developer might supply just the basic infrastructure of roads,
sewer, water and electric, or he might build additional amenities
including a guard house, perimeter fence, common recreational
areas such as tennis courts, a clubhouse, or a golf course.
More and more subdivision developers, especially those
trying to develop a "non-location" site, are starting to pay
attention to the lesson learned by manufactured home developers: to provide amenities that are conducive to lifestyle such as
a clubhouse and recreation areas. Overall, subdivisions can be
the most attractive choice for purchasing out-of-state real estate
in that it has a lot of the advantages of general real estate in terms
of privacy and proven appreciation on your investment, but at
the same time, it has some of the advantages of the manufactured
home or condominium development, in that there is low main
tenance in terms of one's personal labor, not cost, and an implied
sense of community.
The downside of subdivision housing is that you must be
prepared to pay more for your home and lot than you would in
a comparable location and similar sized home in general real
estate. One might argue that this would be expected since you
are not only purchasing a home and a lot such as in general real
estate, but you are also purchasing the whole community along
with its roads and amenities. And, to some extent, this is true.
However, someone else might successfully argue that this devel
oper purchased this land at an undeveloped price of only a
fraction of what he is turning around and selling it to you for. He
is making a large profit, and all that is required is that he build the
infrastructure to improve the land and make it more desirable. In
the profit from the sale of the lot to you is his return on the cost
of the infrastructure plus profit. However, even with the value
of the lot factored out, you are usually still paying more for a
subdivision house than comparable general real estate. Remember, the developer is not only trying for as much profit as
possible, but is looking to be reimbursed for his business and
selling costs above and beyond the actual cost to build the house.
You are not just being charged for the improved lot and house,
but a lot more.
Furthermore, you could also contend that in addition to the
profit in the purchase price, that you are paying a monthly
maintenance fee and in some cases a portion of that monthly
maintenance fee is paying off the developer's debt he incurred
to build the infrastructure in the first place. So there can be profit
built in on all sides of the deal for the developer.
Having said all that, I just remind you that buying in a
subdivision often costs more than established general real estate,
but you generally get more in return. The key issue here is to go
in knowing you are going to pay more, but make sure it's only a
little more, and is within the value set by the area's market.
