Why New Construction is the Smart Play for Real Estate Brokers Today

The real estate market is shifting, and investors are coming up with creative strategies to combat the ongoing inventory shortage. From locating high potential flips, to up and coming areas for new construction, there are still opportunities to generate solid returns despite the state of the market. As a broker or lending partner, you play a key role in assisting clients with identifying these opportunities and guiding their strategy. You can also benefit from providing clients with creative financing solutions to best take advantage of market conditions. New construction in particular can be very profitable, as long as the legwork is put in to ensure a high margin deal.

Are you a broker or lending partner looking to expand into the new construction space? Here’s how offering new construction loan products can help rapidly grow your business.

What Makes New Construction a Smart Move Right Now

There are several economic trends influencing new construction growth. Low housing inventory is still the biggest problem in many real estate markets, and identifying underserved markets is a huge opportunity for real estate investors. New construction properties often have great margins, because homes with modern features, energy efficiency, and low maintenance costs are in higher demand than existing properties. Investors also have options when it comes to exit strategies; in certain markets, build-to-rent may be more viable than a build-to-sell model. Or, if an investor is struggling to sell a particular property, shifting to a rental model can help recoup expenses until the market is in a better place.

How Brokers Benefit from New Construction Deals

The advantages don’t just end with investors though. Brokers can also profit greatly by expanding into the new construction niche. For starters, new construction projects often come with larger loan amounts, which means higher commission opportunities. The investors who specialize in new construction also tend to stay in the space, performing deal after deal, and that can be a great opportunity for repeat business. Additionally, the new construction space has less competition, for both investors and brokers. That means investors are more likely to put together highly profitable deals, and you are better positioned to capture more of the new construction investor market.

Lending Solutions for New Construction Projects

In order to ensure success for your new construction clients, it’s crucial that you match them with the right financing solutions. Working with conventional lenders like banks is not always a viable option, as they have long turnaround times and an extensive application process that may cause investors to miss out on opportunities. Working with private lenders is often preferred, as they prioritize speed and flexibility with their loan products. Private lenders focus on the investment potential of the deal rather than the borrower’s creditworthiness, which means loans can be approved much faster, and investors can still qualify for financing even with a less-than-perfect credit history. These lenders also offer both construction-only and construction-to-permanent options to support any given borrower’s preferred exit strategy.

How to Start Building a New Construction Client Base 

So how can you start breaking into the world of new construction lending? First, you need to take time to familiarize yourself with the space, so you can offer better advice to clients and you can market yourself as a broker who specializes in new construction. The best way to secure new construction loans opportunities is to use targeted marketing efforts to get your name in front of the right investors.

For your existing client base, be sure to educate them on the financial upsides of new construction vs. other strategies like flipping or owning a rental property. You can also utilize your existing email list and social media accounts to highlight lucrative new construction opportunities, and encourage your previous clients to expand their portfolios.

Stay Ahead by Offering Smarter Solutions

As a quick recap, new construction offers many advantages to both investors and their lending partners, from better returns & commissions to easier scalability and less competition in the space. Positioning yourself as an expert that specializes in new construction is the best way to secure new investors, and spark the conversation with existing clients.

Finding the right lending partner is also a key part of the process. Work with lenders who have experience with new construction lending and offer specialized construction loan products. Good lenders understand the importance of speed and responsiveness when funding these deals. A stellar partner will not only be able to provide you with financing solutions, but will also offer resources such as marketing collateral and training materials that help enhance your brokerage’s lending capabilities.

RCN Capital

To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and rates. 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 and lending partners. If you are looking to offer new construction financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.