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Are you looking to build a new property for your next real estate investment? It could be a great idea since new construction tends to have a solid return on investment. Of course, building a home from scratch is no easy task, especially if you’re planning to build a large or multifamily property. There are a few things you’ll need to watch out for during the construction process, and certain road-blocks that can really extend the length of your project. We’re going to cover a few of these items to make sure you stay on schedule and help you get the most of your new construction property.
Building in a low demand neighborhood
Before you begin construction on a new property, you’ll need to purchase the lot you wish to build on. You could already be making a mistake at this step if you choose to build in a community that doesn’t have good housing demand. People will not want to live in an unsafe neighborhood, and they generally prefer to live close to amenities like good schools and shopping centers.
You should also look into the surrounding area and see if there are plans for future growth. More new homes being built means a growing neighborhood, and it will likely lead to an increased value for your property as well. New amenities will also attract more buyers to an area, leading to a better sale price. Job growth can be a great indicator for increased housing demand in a particular area. There are already cities in the south, like Austin and Atlanta, that have seen a huge growth in tech sector jobs in recent years, and an increase in housing demand to go along with it.
Spending too much on upgrades
Building a property can be an exciting venture, and it’s easy to get caught up in the process and spend too much on construction. You might think putting more into a property will translate to a higher sale value, but that isn’t always the case. There are certain upgrades, like a pool or hot tub, where you may not see the return on your investment. You also have to consider the homes in the surrounding area. If you build a mansion in a neighborhood filled with starter homes, you might have a hard time selling, and vice-versa. Essentially, you want the property to fall within the reasonable range of prices for homes in the neighborhood so that it can sell easily.
Not working with experienced professionals
It’s impossible to do everything yourself when you’re building a new property, and that’s why it’s important to rely on trusted professionals to assist you. You could try to cut costs by going with the cheapest builder you can find, but don’t be surprised if the work they produce isn’t up to your standards or they struggle with an issue that an experienced builder could easily handle. For this reason, a builder that has some projects under their belt would be your best choice. They might even have suggestions for your property that can save you money. You should also look into working with a trusted realtor that will be able to help you sell your property quickly, and for a fair price.
Not having any contingency plans
The process of building a new home can be a little complicated, and you are bound to run into one issue or another along the way. For this reason, you should leave a buffer in your budget to cover any unexpected costs that may arise. Also, with supply chain restrictions still being felt in some industries, you can expect shipping delays for certain materials. If you do encounter a delay, work with your builder to accommodate the issue while still staying on schedule with construction. It’s important not to let these small speedbumps interrupt the completion of your project, since the faster you can sell the property the less time your investment spends at risk.
Not working with a trusted lender
You could be losing money by working with the wrong lender on your real estate investment. Strive to find a quality lender that has experience with new construction investing and that can give you the best rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are an investor looking to finance a new construction, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.