Real estate continues be one of the best way to invest your money and have it start working for you. Even in times of economic downturn, real estate proves to be a great investment because of its ability to generate significant returns for owners. New construction is one of the many ways to turn a profit with real estate, because often a home will be worth more than the materials and labor used to build it. There are even a few techniques that you can use to help ensure that a new construction project stays profitable. Continue reading to learn more about these methods, and how you can make a great return with new construction investing.
Have a plan and budget
A successful deal always starts with a good plan. Before you even make your first purchase, you should have a solid plan, timeline, budget, and exit strategy for the new construction property. Things tend to change as a project develops, so having a plan ensures that you stick to the main goal you had originally intended to hit. Similarly, your timeline will help you quickly notice if you’re falling behind schedule so that you can keep the project on track. Finally with your budget, it can be a good idea to leave some extra room in it just in case there are unexpected costs that arise. A good rule of thumb is to overshoot your bare-minimum budget by 10%.
Build in a good market
First and foremost, know that you don’t have to limit your investment to markets near you. There are certain markets across the US experiencing rapid growth and high demand, and building a property in one of these areas can lead to an even greater return on your investment. By the time construction is completed, your property is likely to be worth more due to the growing demand for housing in these areas. Taking the time to research markets that are currently experiencing high growth can lead to a significantly more profitable investment. Some great markets to look into include the Austin, Nashville, and Charlotte metropolitan areas.
Find a great location
Once you’ve chosen the market you’d like to build in, it’s time to find the right location. Location is always an important factor to consider with real estate deals; homes in good neighborhoods sell quicker, and often for more than their asking price. Generally, people want to live in safe neighborhoods, with access to amenities like shopping and entertainment close by. In bigger cities, homes that are more “central” tend to be worth more since they have easier access to more amenities and will be higher in demand. Just like the market you build in, choosing a good location is an easy way to bring up the value of your construction investment.
Incorporate the right features
Your property will be more desirable, and in turn more valuable, if you incorporate the right features into its construction. Many newer homes are built with modern design elements in mind: that means things like energy efficiency, open-design, and large windows for natural light. You will also want to make design decisions that you know will have broad appeal. A safe bet would be to use a neutral or muted color palette. It can be tempting to include features that appeal to your personal tastes, but remember that your goal is to sell the property afterwards, so you will need to keep your spending in check.
Work with a quality team
Working with the right team can be the difference between a somewhat profitable deal and a very profitable one. When you’re choosing a contractor, it can be a good idea to ask for references of past work and if they have experience with new construction. A good contractor may even have design suggestions that can save you time or money. You will also want to work with a trusted real estate agent, since they will be able to sell your property quickly and for the right price. Finally, choosing a quality lender will be important since they can get you the best rates and leverages, and they’ll be able to provide you with even more resources to help make the deal possible.
Are you struggling to find financing for a new construction investment? 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. 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.