How to Make Money with New Builds
Disclaimer
Here on Selfmadesns.com, I share my personal life experiences so you can learn from both my mistakes and successes. However, what works for me might not work for everyone. Always do your own research and consider consulting a professional before making important decisions. Doing both will give you the best chance for success. For more details, please visit our Terms and Conditions and Privacy Policy pages.
My Journey Into New Builds and Real Estate Investment Strategies
Introduction
When I first started in the real estate world, it felt like I stumbled into it. I was moving out of my condo and planned to sell it, like most people would. I was going to use the money from that sale toward a new home. Not because I couldn’t afford the new place, but simply because that’s what I had always done.
One day, I was at lunch with some friends, and they suggested something different: buy the new home and rent out my condo to create a new revenue stream. From then on, I was hooked. I started diving into different real estate strategies, and today I want to share one of my favorites with you.
New Builds: A Team Effort
New builds are real estate projects developed from the ground up. These projects are truly a team effort. Here’s how it usually works:
- A real estate developer finds and purchases a suitable piece of land.
- Planning and zoning permissions are obtained.
- Banks or investors provide funding.
- Construction companies handle the building process.
- Real estate agents are brought in to sell or rent the property.
- An HOA may be established to manage the community.
Everyone plays a key role in getting the project off the ground and turning it into a successful investment.
My 1st Strategy: Early Entry Into New Developments
My first strategy involves having my realtor on the lookout for new neighborhoods in development. If the project meets all my criteria, I buy one or more plots early on.
These communities usually offer homes at multiple price points. I typically choose the lower-end floor plan and upgrade it myself with high-end finishes. From there, I have a few options:
- Rent it out at top market rates.
- Sell it quickly if the offer is too good to refuse.
- Hold the property until the neighborhood gains popularity, then sell high when demand is up and supply is down.
My 2nd Strategy: Building Custom on Great Land
In this strategy, my realtor and I hunt for good plots of land or undervalued homes sitting on prime land. If we find a great plot, we operate just like a real estate developer.
We work with a trusted construction company and either reuse one of our favorite floor plans or try something new. I usually prefer to hold on to these builds. But early on, I sold my first few.
For example, I would build duplexes with features like 3 bedrooms, 2 bathrooms, finished basements, and two-car garages. Then I’d take out a home equity loan on the new build to fund another project and rent out the original build. This way, the rental income pays off the loan.
Bonus: Things to Consider When Building a Home
If you’re thinking about building from the ground up, here are a few important things to consider:
#1 – Septic Permits
Before you commit to a lot, make sure you get the proper septic permits. These permits dictate how many bedrooms you’re allowed to have. For example, don’t plan for a 5-bedroom home if the permit only allows for three.
#2 – Property Restrictions
Check for any land-use restrictions. Whether you’re in an HOA or on farmland, rules might limit:
- Home size or type
- Building materials
- Setback distances from property lines
#3 – New Construction Loans
If you’re not paying out-of-pocket, you’ll likely need a new construction loan. These are shorter than traditional home loans, and closing costs may differ. Always budget accordingly.
These aren’t the only things you’ll need to look out for, but they’re a solid starting point. Bring these topics up in your planning phase and do your own research.
Summary
There you have it—my two go-to strategies for investing in new builds, plus a bonus section to help you start your own journey. These methods have worked well for me, but there are many ways to succeed in real estate. Hopefully, this post helps someone out there looking to break into new construction investing.
If you have your own strategy or questions, drop them in the comments. Thanks for visiting!