Here’s How New Construction Loans Help Brokers Win Big

New construction has seen a massive increase in recent years as investors and developers look for ways to combat the U.S. housing shortage. These projects can be very profitable for investors, especially if they take the time to identify high-demand markets that are undersupplied. For brokers and lending partners, they also present a great opportunity to branch out into a highly rewarding asset class. New construction offers brokers several advantages, including bigger commissions, loyal clients, and less competition from other lenders.

Interested in learning more? Here’s how new construction lending helps brokers win big in today’s highly competitive real estate market.

The New Construction Boom and What It Means for Brokers

National trends show that new construction is booming, with both housing starts and new homes sales increasing. Just like home flipping, new construction offers investors a significant return in a short-time period, and it doesn’t demand consistent management like rental property. Market research is also key for these investments, as identifying underserved markets can lead to even higher profit margins. Unlike home flipping, however, it doesn’t require an existing property to get started, and there is high demand for new properties that include modern features and styling.

As a broker or lending partner, you play a crucial role as a facilitator for clients who struggle to secure funding for these projects. Stepping into this asset class allows you to fill a growing financing gap and be rewarded for it. Brokers who specialize in construction lending are poised to reap the benefits of a growing niche with advantages for both investors and their lending partners.

Bigger Loans Mean Bigger Commissions

One of the greatest advantages of new construction for brokers is bigger commissions. New construction loans typically carry higher principal amounts than traditional investments, as new properties often have more features and are worth more than existing homes. Complex projects like these offer more opportunities to bring value to your clients. You will play a key role in nearly every step of the investment, from helping your client strategize to managing timelines and performing draw requests for them. These clients also tend to be repeat customers, often seeking out long-term financing for their property or making new acquisitions after a sale.

Less Competition = More Opportunity

Another major benefit of branching out into new construction is that there’s less competition from other lenders. Many brokers avoid construction loans due to their perceived complexity, though they really aren’t too different from a fix & flip loan. Sure, they involve draw requests, but many of the processes for securing financing are the same as any other type of loan. Those that are willing to learn how to close these loans gain access to a relatively uncrowded space, filled with investors that are in dire need of knowledgeable advisors who understand the space. Having less competition means more chances for you to win new clients, and close more deals.

Stronger Client Relationships and Repeat Business

We mentioned that new construction clients often return to their lending partners for repeat business, and it’s true that they make some of the best clients for brokers. The investors who deal in new construction are typically established professionals in the space already, whether they be seasoned developers or builders themselves. They tend to close multiple deals per year and for many years to come. By helping client secure funding quickly and navigate the draw process effectively, brokers can become strategic partners and establish strong business relationships that benefit everyone involved.

What Winning Brokers Are Doing Differently

The key to closing a high volume of construction loans is differentiating yourself from the run-of-the-mill financing provider. Brokers who take time to educate themselves on the funding process and stay current on lending guidelines can offer more relevant advice, and help their clients win more often. Partnering with a wholesale lender that specializes in new construction is also key; find one that understands the importance of communication and speed when funding these deals, so you can provide superior service to your clients.

To increase your market reach, consider positioning yourself as a broker that specializes in new construction loans. Build out email campaigns and a social media presence that highlights your expertise, including things like market updates, deal finds, and success stories. You should also create a streamlined loan process for these projects, with pre-qualification tools and clear steps borrowers can follow to secure funding.

RCN Capital

To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and 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 and lending partners. If you are looking to offer new construction financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.