There's no deposits or presales to fund partial development or create an initial income stream
I don't know how widespread the practice is, but in the mid 2000's I went to a seminar that was exactly this. Pre-sales of condominium units in rental seniors-only housing.
The premise was that you could purchase (at a substantial discount) the condos before they were built, knowing the expected minimum rental income based on the surrounding neighborhood. It was likely that the tenants would stay there for the rest of their lives.
I decided not to invest, but I talked to some people who had done it before and, well, it was a goldmine!
Some people made real money on the boom. But by the time your barber is talking about flipping, dead money is coming to the table. The bubble burst in October 2005, that's when sales in Florida started flagging. Easter Sunday of 2006, the front page of the Atlanta Journal Constitution had a story about problems with the condo market along the redneck riviera. That's more than a year before anyone had heard of sub-prime.
The people I know who made money on the rising tide of condo prices made it by building the things because they saw their pro forma get better and better during entitlement and construction. Then, for the most part, they lost every bit of it and more on the follow on projects they started in 2005 through 2007 because those came online during the down cycle but had costs and returns premised on the upcycle. They ran out of money and faced the same sort of dilution a startup would.
I don't know how widespread the practice is, but in the mid 2000's I went to a seminar that was exactly this. Pre-sales of condominium units in rental seniors-only housing.
The premise was that you could purchase (at a substantial discount) the condos before they were built, knowing the expected minimum rental income based on the surrounding neighborhood. It was likely that the tenants would stay there for the rest of their lives.
I decided not to invest, but I talked to some people who had done it before and, well, it was a goldmine!