Residential lots: the next big boom

Investors buying on the cheap aim to capitalize on recovery

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Over the past two years, in a number of markets stretching across the West, from Phoenix through Las Vegas to Sacramento and Riverside, investor groups have been maneuvering to acquire finished residential lots that due to the recession ended up stranded without hope like lost pilgrims in a vast desert. There were so many unfinished developments of one size or another that the buying spree lurched along in starts and stops through this year with another great push at the end of 2009. Some cities have been scraped almost clean of unsold finished lots, but, again, there were so many sites slated for residential development over the past decade that it's been hard to get to them all. Yet, the economics of investing in finished lots is so darn attractive it's worth hunting them down. Typically, the cost of a lot is about 25 percent of the finished house price. So, if a home sold for $800,000, it probably cost the developer $200,000 just to buy and prepare the lot, getting it g...