Should you start your own ‘Monopoly Project’? Should you start acquiring rental properties? In this series we examine the ways to start your own “Monopoly Project” (TMP).

In our first post of this series, we explained the first thing you should do is to get into shape – Financial Shape. Then we showed how and why we started our MonopolyProject in ‘Start Your Own Monopoly Project – Step 2: Our Way’. Then we explained a method you should never use: Step 3: OPM – Other People’s Money.  In “Start Your Own Monopoly Project – Step 4: House Hacking – Joey Sleeps in the Sink” we took a side street and looked at “House Hacking”. Then we looked at ‘Step 5: Get A Partner.’ “Start Your Own Monopoly Project – Step 6: Get Back to Reality”  backtracked “Start Your Own Monopoly Project – Step 5a: The Perfect Monopoly House”.

Then in Step 7 we talked about: “Now we will talk about the advantages of buying a new-build home that doesn’t even exist when you buy it.” And we did exactly that. We bought a new build house in Coolidge, AZ earlier this month.

Earlier we explained the financial advantages of a new build:

Financial1: After qualifying for the loan, you only must put down the earnest deposit. In the meantime, the house that is being built appreciates in value. Typically, the new home builder raises the prices of the houses as the development is built out. So, it is best to be first in line, buy at the beginning of that development.

The purchase price per the contract is shown below:

Here’s how we calculate the Equity (last column). For the first month, the equity is simply the “Deposit” that we took out of our bank account and now is credited to us in anticipation of escrow:

The home builder typically increases the base price, lot premium and on-site options as time goes by…

…and as the lots/houses sell. Different builders use different algorithms to calculate the increase amount. The situation with lumber and other supplies will increase this tendency.

Here’s a hypothetical that shows the increases as the 10 – 12 month build time goes by:

You can see the hypothetical bumps in the ‘base price’, ‘on site options’ and “lot premium’. This leads to an equity increase of $32,000 at close of escrow. Note that the rental price will also increase as does the home value.

We will track these parameters, as best we can, during the build period and report in our monthly status updates.