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Thinking of starting an investment from the ground up? New construction is an investment that will have a profitable return, although it is a big project that requires a lot of time, commitment, and hard work. Don’t go into an investment without knowing these things about New Construction Investments:
Location is Crucial
The location is crucial for the success of any new construction project. Put yourself in the shoes of the buyer, if you were buying a brand new home, location is one of your first decisions. You would ask yourself: Is the location safe? What amenities are nearby? Is the location ideal for my personal preferences? The location will raise the value of the property so look for areas with high demand, good infrastructure, amenities, and potential for growth in property values for your own investment returns.
Conduct a Thorough Market Analysis
Make sure you do your market research to understand the supply and demand dynamics, pricing trends, and future prospects in an area. Population growth, employment opportunities, and development plans are all things to consider when investing in new construction.
Construction Takes a Team
Before investing in new construction, make sure you have considered the contractors you put on the job. Contractors necessary to build a house include:
- Excavator
- Concrete contractor
- House framer
- Roofer
- Electrician
- HVAC contractor
It takes a lot of people to complete a new construction project efficiently. Make sure to conduct background checks on contractors to guarantee they are the right fit for your job. Also, take the time to budget correctly to ensure you are able to pay all your contractors appropriately.
Don’t Forget to Budget
Calculate all costs involved in the project, including land acquisition, construction costs, permits, taxes, and contingency funds. Ensure your budget is realistic and includes a buffer for unexpected expenses. Consider different financing options such as bank loans, private investors, or crowdfunding platforms. Evaluate the interest rates, terms, and conditions to choose the most suitable financing option for your project.
Make Sure You Stay in Line with the Law
Understand the zoning laws, building codes, permits, and regulations in the area before you start construction. Failure to comply with legal requirements can lead to delays and additional costs so understanding them prior to your investment can save you lots of time and money!
Consider the Pros and Cons
Pros include the strong potential for financial return, the ability to have freedom through customization, implementing energy efficient technologies which not only raises value but will attract buyers, and finally, because the construction is new the maintenance is low!
The cons to consider include the time it takes to build and sell new construction property, the expensive upfront costs, and the uncertainty of the market. New construction can be risky as well because of potential delays, market changes, and legal disputes.
Purchasing insurance policies could protect you against many unforeseen events. With all pros and cons considered, and with the dedication and time needed to build a quality new construction home, the return on investment is inevitable.
By carefully considering these factors and conducting thorough due diligence, you can make informed decisions and maximize the potential returns on your new construction investments.
RCN Capital
If you want to save on a new construction investment, 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 property, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.
