Maximizing ROI: Tips for Investing in New Construction Properties

Maximizing ROI: Tips for Investing in New Construction Properties

The world of new construction investing has become even more competitive in recent years, mostly due to inflated material pricing and leftover supply chain constraints from the pandemic. However, it still has the potential to be a very rewarding asset class for investors. The national housing shortage means that there are still many underserved markets which can lead to impressive returns on new construction. Still, you will need to know how to make the most of your construction projects if you want to achieve investment success. In this piece, we cover the strategies investors are using to profit from new construction properties in 2024.

Luxury house with nice landscape in suburbs

Understanding the Basics of ROI for New Construction

The key to success with a new construction project, or any real estate investment really, will lie in proper research and careful planning. For a new construction project, you generally have more control over the market you choose to invest in, the specific location, and the property’s features. It’s important to take time and compare various different markets to determine which ones will be more or less profitable. From there, you should try to find a quiet neighborhood that also has easy access to amenities as this will increase demand for the home. Finally, choose to build a property with features that are attractive to prospective buyers, but be careful not to waste your budget on unnecessary features that don’t add any real value to the home.

Choose the Right Location

If there’s one thing that will always be true in real estate, it’s that location is everything. For a construction project, you should start by taking a look at the statistics on the markets you are considering, including data on population growth, rent/property values, and the health of the area’s job market. Then, you can begin the search for a good location. An ideal neighborhood will have access to good schools and local amenities like shops or entertainment districts. Luckily, new homes are often built in areas with plans for future developments, or subdivisions with even more new properties. This means you can benefit from growing property values as time goes on and the area becomes more developed.

Select Desirable Features and Amenities

The next step will involve laying out the design for your property, and this means choosing which features to include in the home. Modern homebuyers expect a certain level of amenities in a property, but you can also make use of some design trends to further increase property value. Smart home technology is becoming more and more common, so things like smart locks, doorbell cameras, and intelligent heating/cooling systems should be standard for a new home. In terms of floor plan, open concept design and making good use of natural light can help make smaller homes feel bigger. Finally, you should opt for energy-efficient appliances and lighting, as they help reduce ownership costs and can become selling points when marketing the property.

Partner with Reputable Builders

When it comes to selecting a developer to partner with for your project, you should take the time to carefully vet them and ensure you are working with a trusted professional. Always consider customer reviews, and ask for a portfolio of their past projects to get an idea of the quality of their work. You can also tell if you’re working with a reputable contractor if they provide sufficient warranties for their work and other forms of post-construction support. If you want to save some money during construction you can always perform some of the work yourself, but you should be realistic about your skillset and leave major jobs like plumbing and electrical work to the professionals.

Timing the Market

Timing can also be an important factor if you are trying to maximize your return on investment with a construction project. First, know that real estate tends to follow a seasonal cycle, with decreased purchase activity in the winter months and higher demand for properties in the summer. If you want to sell your property in the peak season, you should aim to have it completed and listed by mid-spring at the latest. It can be difficult to time your market though, and you may need to pivot to a different exit strategy for your investment. Renting your property out for a period of time allows you to recoup some of your construction costs, and sell the property at another time when market conditions are more favorable.

Financing for New Construction Investments

Securing financing for a new construction project is a bit more difficult than it is for existing real estate. For starters, there is no collateral in the form of a property to back the loan, and new homes are typically valued higher than existing ones. This means that loans from banks or other traditional lenders typically have lots of hoops to jump though before you can get approved. Alternatively, you may want to consider a loan from a private lender that operates in the real estate space. Private loans can provide various benefits such as more flexible loan terms, and a faster approval process so you can move forward with your project sooner.

Effective Marketing Strategies

After construction is complete you will be working to market your property, whether you are selling it or just planning to rent it out. Creating a stellar property listing will be a vital part of your marketing strategy. Consider hiring a professional photographer to take visually appealing photos that highlight the property’s best features. The listing itself should also be detailed, and provide ample information on the property itself and the surrounding neighborhood/area.

You may also want to consider posting the property on social media to further extend your marketing reach. Local real estate groups on sites like Facebook are a great place to get the word out about your property, as they are filled with both buyers and sellers located in the same area as your home.

RCN Capital

The easiest way to save on a new construction investment is to work with a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors & developers 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 acquire financing for a construction project, RCN Capital has competitive loan options available.