Unlocking the Lucrative Potential of New Construction Investments

Unlocking the Lucrative Potential of New Construction Investments

The new construction asset class offers a path to attractive returns for investors that are willing to do their research and learn the ins and outs of this rewarding strategy. New properties make for a good investment because the cost of labor and materials is typically less than the home’s final sale value. There are many factors to consider with new construction, however, especially if you don’t have any previous experience with it. Still, by making use of trends and employing some key strategies, you may be able to vastly boost your project’s returns. In this piece, we want to cover the crucial steps an investor should take for maximizing the value of their new construction investment.

House keys with homes on stacks of increasing coins

Trends and Opportunities in New Construction

There are various trends in the new construction space that will present a good investment opportunity for those keeping an eye out for them. Today, there are certain metropolitan markets seeing very high growth, which is evidenced by a rapidly expanding population and rising home prices. If you can identify a good location for an investment in one of these markets, it can lead to significant returns.

New construction also makes sense as you build more properties, or large multifamily homes with many units. As you build more, the cost of each unit goes down since you can benefit from economies of scale, and many of the tools and other resources used in a project can be used again. You may benefit greatly from investing in a large housing development, and gradually building it out over time.

Understanding Market Dynamics

As with most other real estate investments, due diligence and market research is what often defines your success with new construction. We mentioned how the market you choose to build in is important, but so is the actual neighborhood your investment will be located in. Ideally, buyers will be looking for quiet areas with proximity to amenities like shopping, restaurants & transportation. If an area is experiencing significant infrastructure development this can also be a good indicator of a place worth investing in.

Modern homebuyers will also be expecting a property that provides them with modern amenities. Incorporating contemporary design features such as open concept and heavy use of natural lighting will pay off through higher demand for your property. Another good area to focus on is energy efficiency, which can be achieved through specific lighting, appliances, and building materials like insulation. These items help reduce monthly bills and can become marketable selling points for the property once construction is finished.

Strategies for Success

There are really only 2 exit strategies you can choose from with a construction project, but each one of them has its own pros and cons. If your goal is to simply sell the property and be done with it, then you will want to dedicate even more time to market research and property speculation. This strategy is most effective when you’re able to make wise investment decisions where your predictions have paid off. But if you’re willing to hold on to the property for some time, build-to-rent can be an even more effective strategy since new homes often fetch high prices on the rental market. Sometimes, you’ll have trouble selling a home just because the timing of the market is wrong. Renting it out can be a great way to reclaim some of your project’s construction costs, and it allows you to still sell the property when the time is right.

Financing Your Investment

Securing financing for your new construction project isn’t as simple as going to your local bank and signing some papers. Generally, a bank loan also comes with a lengthy approval process where they will carefully examine all the aspects of your project to ensure it’s financially sound. This is great for the bank, but it also means delaying your project for an unknown amount of time.

Alternatively, you should consider obtaining financing from a private lender that operates in the real estate space. These loans are typically secured by collateral, which means less risk on the part of the lender, less of your own money required as a down payment, and an easier time getting approved. Private lenders are able to deliver funding in as little as two weeks, which means you can get started on your project sooner. They may even be able to provide you with resources and valuable real estate connections to help you find success with your investment.

Marketing Your Property

The marketing and selling stage of the process is very important, since it’s when you will finally see your investment’s returns. You should make an effort to create a stellar online listing that really grabs the attention of people browsing properties. This is achieved through a combination of great photos that cover all the home’s features, and detailed property descriptions that will keep them drawn in. Consider hiring a professional photographer to capture your property in the best way, and be sure not to neglect the home’s exterior as it can be the key element that leaves a lasting impression.

You can also employ technology to get the word out about your listing. In today's world it’s not uncommon to see property listings on social media. There are real estate groups dedicated to posting local properties and apartments which make for a great place to market your listing at no cost. Once you have generated enough demand for your property, you can work with your listing agent to showcase the property to interested buyers or renters and hopefully close the deal.

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.