In light of the high demand facing today’s real estate markets, new construction projects can be a very lucrative investment avenue. These properties give investors a chance to make excellent returns, typically much higher than you would expect on a standard home flip. Building a home is no easy task however, and you will need to work with experienced professionals if you aren’t familiar with the construction process. Making a solid return on your investment is another story. If you want to get the most out of your new construction project, there are a few things you should take note of before diving in. In this post, we’re going to go over some of these tips to help you maximize the return on your new construction investment.
Price the property appropriately
One thing you want to avoid with your new construction property is building a home that is out of place in the neighborhood it resides in. New homes tend to be higher in value simply because they are new, but you don’t want to add too many features that will send the home’s value skyrocketing. Not only will this cut into your costs, but you can also have trouble selling the home since it may be out of budget for most buyers. At the same time, you may be tempted to go with a smaller home since it will cost less to build, but instead you will run into the issue where the home will not fit certain buyers’ needs. Ideally, you want to spec the home to fall inside the reasonable range of prices for homes in the surrounding area, and it may fall into the higher end of this range since it is a new property.
Build in a growing community
The beauty of a new construction property is that you have many different options where you can choose to build. And if you choose to build a home in a growing community or neighborhood, your property may benefit from the hype surrounding that growth. For example, let’s say you chose to build in a new housing development where you know even more properties will be built in the coming months. By the time construction is completed on your property, it will likely be higher in value than you had expected due to growth in the surrounding neighborhood. You could also choose to build in a developing area of a city, where you know new amenities will be built over time. These amenities, or even the anticipation of their arrival, will attract buyers and drive up the value of your investment.
Incorporate designs with broad appeal
When you set out to design the property you will build, you’ll have to fight the urge to add features that appeal to your personal tastes. This isn’t just because your tastes may differ from most buyers, but you also run the risk of overspending if you go down that path. You can easily spend thousands on unnecessary upgrades that don’t add any real value to the property but will cut into your returns. Instead, you should try to incorporate designs that have broad appeal which fit most buyers’ tastes. Most modern homes are built with open designs and choose neutral or muted color palettes, since these are less likely to put off potential home buyers. Your builder can also be a great resource for this step, and they may have design suggestions that follow current home trends while also saving you money.
Don’t lose out on the sale
The sale of the property might just be the most important piece of the process since this is when you will actually realize your returns. That means you need to ensure you receive a good offer on the home and you don’t have all the time, effort, and resources you put into the project go to waste. Pricing your property appropriately will help make sure you receive reasonable offers, but the sale process does not end there. Don’t be afraid to negotiate with buyers, and if you aren’t familiar with negotiating then now would be a great time to learn. You may also want to enlist the help of a realtor for the sale of the property, though you should be prepared to pay them a percentage of the final sale value.
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 finance a new construction, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.