Maximizing Investment Opportunities with New Construction

The U.S. housing market is experiencing a significant inventory shortage, with demand far outpacing supply in many areas. This can create challenges for real estate investors, as securing a property at an affordable price can be a daunting task. However, there is a promising solution: new construction. For brokers, private lenders, and referral partners, this emerging trend provides a wealth of investment opportunities. New construction projects can provide high returns, especially when approached with the right strategies.

If you're involved in real estate finance or brokering, consider how you can leverage the demand for new homes to build lasting partnerships and foster successful investments. This article will dive into how you can use new construction to fuel your investment portfolio and why this can be a profitable avenue for your clients and network.

Build-to-Sell: A Straightforward Approach for High Returns

The build-to-sell strategy is one of the most commonly used methods for turning a profit with new construction properties. With the shortage of homes in the market and the appeal of brand-new properties, this model offers a reliable way to earn returns for both brokers and lenders.

New homes often have a higher value than the cost of materials and labor required to construct them. The pristine condition of a new build, coupled with modern features and appliances, makes it a desirable option for homebuyers. Many buyers are drawn to the fact that they will be the first to live in the home, and there's a certain excitement that comes with newness. Furthermore, because these properties are newly built, they require less maintenance, which adds to their attractiveness.

For brokers, this model offers an opportunity to guide clients in high-demand markets, ensuring that they can sell the homes quickly. Areas around up-and-coming cities are ideal for this strategy, as the population growth and demand for housing often increase the property's value.

Build-to-Rent: An Alternative for Long-Term Income

Another approach that is gaining popularity is build-to-rent. With rental prices continuing to rise in the U.S., more investors are looking toward constructing homes to rent out rather than sell immediately. This strategy is a great option for brokers, private lenders, and referral partners looking to establish long-term, stable portfolios for their clients.

For lenders, this model also offers an opportunity to provide financing for multi-family or rental property developments, a growing market. Build-to-rent developments can be particularly lucrative in markets where rental demand is high. Moreover, building new homes to rent gives the investor the flexibility of holding onto the property for appreciation over time.

As a broker, you can play a critical role in finding these long-term investment opportunities for your clients. Help your clients navigate the financial landscape, secure the necessary financing, and manage rental properties effectively. If a home isn't sold immediately after construction, the option to rent it out provides a reliable income stream while the market stabilizes. When the rental term ends, the property is likely to have appreciated, offering a valuable return on investment.

Build Smaller Properties: Maximizing Returns with Multiple Builds

When it comes to new construction investments, sometimes the most profitable strategy is building multiple smaller properties instead of one large home. By doing so, you can potentially maximize your returns. This is especially useful for brokers and lenders who are working with clients who have a fixed capital amount but want to get the most out of their investment.

For example, let's assume your client has $150,000 to invest in new construction. If they build a single large property, the home's market value may fall in the $190,000 to $225,000 range, giving them a maximum profit of $75,000. However, if they decide to build two smaller homes instead, each priced between $110,000 and $150,000, their maximum profit could double. The combined value of the two homes can range from $220,000 to $300,000, potentially providing $150,000 in profit, more than double the return of the single larger home.

This strategy works particularly well in emerging markets or rapidly growing neighborhoods, such as those surrounding cities like Austin or Charlotte. Brokers can guide their clients toward these up-and-coming locations, where the demand for affordable housing is high.

Key Considerations for Location and Design

No matter what strategy you or your clients decide to pursue, location and design will always play an essential role in maximizing returns. For brokers and lenders, this means helping your clients choose the right location for their new construction properties.

Growing markets and emerging cities are prime areas to build, as the potential for property appreciation is high. In these areas, new construction homes can benefit from neighborhood developments, improved infrastructure, and the addition of amenities such as schools, shopping centers, and entertainment venues. A property built in a developing neighborhood may see an increase in value as the surrounding area grows, offering a significant return on investment over time.

When it comes to design, brokers can provide guidance to ensure that the features selected for a new home will appeal to a broad audience. For example, a swimming pool or sauna may not be universally appealing and could limit the property's marketability. Opting for neutral finishes, such as light-colored paint and modern fixtures, will appeal to a larger pool of potential buyers and renters. For brokers, guiding clients to make cost-effective yet attractive design choices can ensure a quicker sale or lease.

Financing Opportunities for Brokers and Lenders

For brokers and private lenders, the opportunities within new construction are vast. Lenders can provide the capital needed for developers or investors to begin these projects, and brokers can help facilitate these transactions by matching the right clients with suitable financing options. The demand for new homes and rental properties is on the rise, which means that investors are in need of flexible, competitive financing solutions.

RCN Capital, for instance, specializes in short-term and long-term financing solutions for real estate investors. They provide both fix-and-flip loans as well as construction loans for new builds, making them an excellent partner for brokers and lenders who want to help their clients succeed. Brokers and referral partners can earn commissions by referring clients to financing options like RCN Capital, and lenders can expand their portfolio by offering competitive loans to those looking to invest in new construction properties.

For private lenders, offering financing for new construction projects is an opportunity to tap into a booming market. With housing shortages continuing across the U.S., the need for new homes is higher than ever. Investors are eager to seize the opportunity, but they often need financial backing to make it happen. By partnering with investors to finance new construction, lenders can position themselves as crucial players in the real estate investment ecosystem.

RCN Capital: Your Key Partner in Funding New Construction Investments

New construction properties offer an array of opportunities for brokers, lenders, and referral partners to help their clients succeed in an increasingly competitive market. Lending partners who can guide their clients to emerging markets and ensure they make sound financial decisions can position themselves as valuable partners in this asset class.

At RCN Capital, we offer competitive new construction financing options for real estate professionals and investors. We also have an award-winning broker referral program available to lending partners. Reach out today to explore how we can help you and your clients make the most of the new construction boom.