Like many real estate investors, you may be considering getting into the business of New Construction. These properties can have a great return-on-investment (ROI) which is why many people are attracted to them. However, if you don’t know what you’re doing you could easily make mistakes that will cut into your returns. Even if you’re an experienced investor there are a few things that you’ll want to keep an eye out for. If you want to maximize the profit of your investment, be sure to follow these tips.
A common mistake investors will make with their first foray into New Construction is over-specing the property. You may think that if you invest more into the construction of a home it will directly translate to a higher sale price once everything is completed. The thing is, you have to consider the surrounding area that the home is in. If the property is in a neighborhood with typical and starter homes, you don’t want to build a mansion since it would be out of place. In fact, you could really hurt the value of the property by doing that. Instead your goal should be to create a modern home with features that have broad appeal. That means less pools and hot tubs, and more focus on things like open design and modern aesthetics. You should also place your attention on high traffic areas like the Kitchen, Bathrooms, and Living Areas.
Speaking of a home’s neighborhood, the location of your property can greatly affect its sale price. You definitely want to build your property in an area that’s safe and with a close proximity to desirable amenities like stores and quality schools. If possible, you’ll want to choose a lot that has a good amount of land. Another thing to consider is how the area will develop over time. If you believe the neighborhood will see more new homes being built, or if you know the city is planning large-scale infrastructure nearby, you can expect to see hugely improved selling prices. An unexpected benefit of building your home in a growing neighborhood is that it will develop a sense of community over time, and that can be a very desirable thing for family-oriented buyers.
The simplest way to make your investment more profitable is to minimize your expenses. And an unexpected way you could be saving on the cost of construction is by working with an experienced builder. They will be able to ensure your project is completed in a timely manner, and they might even have recommendations that can save you time and money. It could also be a good idea to negotiate with your builder. If they aren’t able to save you money directly, they may be able to offer you upgrades for free or at a steeply discounted price which will increase the sale value of the home.
Another way you can save money on your investment is by working with a reputable lender. Your builder may have a preferred lender they will recommend, but you should still do research on your own and weigh the options. Look for a lender that has a proven track record, ideally with experience in New Construction lending. Reputable lenders should be able to offer you the best rates available, and they will also be able to assist you in the lending process to save you time and money.
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.