As the real estate industry cool down, the profit likely of home ownership has decreased as well. Here’s a tactic called “follow the builder.”

It is relatively easy to make a profit when you sell your home if the market is rising sharply like it has been in most of the country for the last three years. It turns out more challenging when a hot market slows down. It’s very hard to make a profit on the sale of your home when prices are dropping.

Is there a way to be fairly sure you’ll earn a profit when you sell your home? There is under all but the most adverse market conditions. In fact, I’ve seen young, energetic couples use this maneuver multiple times when they don’t even need to move.

Follow That Builder

In several places in the country, there are builders who build over hundreds of houses every year within a fifty-mile radius of each other. They build whole communities or are among one of three to five builders who build the whole communities around big employment centers. This presents you with an important chance.

New Community

Builders will usually sell first phases of communities for considerably less than later phases. On one side, they need to get the cash flow moving. On the other side, it is harder to sell at high prices since the community normally comprises of dirt lots and construction equipment. Put them together and you have a good profit opportunity.

The idea is to get in on the first phase of the build out. You will purchase the home at a discount, which gives you built in equity. As the community is built up, you sell the home for a profit at a higher price. While you’re doing this, you keep tabs on the builder’s projects and find another location where you can do the same thing.

You’ll end up living in each house for a year or more and taking up nice profits along the way. The only real downside is you have to move continually.

Tax Consequences

I’ve seen this work well for a number of people who have done it more than once. However, you need to know that generating a profit this way can have tax concerns. You need to discuss your plans (including projected timing and profit potential) with your tax professional so that you are prepared to deal with any tax consequences.