New construction is generally expected to create a variety of real estate investing opportunities. For example, in cities with new construction, house prices tend to increase as well as the demand for new improved houses. For real estate investors, this is definitely a money-gaining opportunity. When it comes to investing in residential real estate, there are only two basic types of property you can invest in – new construction and resale.
Resale properties are more often purchased directly from the homeowner who has been living in it themselves or has been leasing it to tenants. They are typically not purchased from a builder or developer. New construction properties are those that are purchased directly from the builder or developer who constructed the property. They are the owner and seller. They do not have a resident and have never been lived in before. In short, they are considered brand new. So what are the benefits of investing in new construction real estate?
1. Small deposits
Builders will typically require a very small deposit to secure a contract for a newly built property. Upfront builder deposits can range from as little as 10% of the purchase price. This is sometimes negotiable and is a major advantage for investors who prefer to minimize their out-of-pocket cash until the actual closing date.
2. Low maintenance and repair
Unlike resale property, new construction property comes with a builder’s warranty which is required by law. Typically, warranties cover materials and workmanship as well as all systems (electrical, plumbing, heating and air conditioning) for up to two years. There is also a 10-year warranty covering major structural elements such as the foundation and basement walls. For investors, this will help them save up a lot of money and maybe use the extra money for new real estate investing opportunities in the future.
3. Emerging markets
New construction can always be found in growing and emerging markets. As a real estate investor, this is where you want to invest to reduce your risk and maximize your long term appreciation. As always keep in mind to research your markets. You want to avoid purchasing a new property in areas where employment, shopping and other important amenities are far away and require long a distance travel. This will not benefit you for your real estate investment outlook for the future.
New construction properties tend to appreciate at a faster rate than their resale counterparts. As new developments see an increase in residents, retail establishment, schools, and other amenities quickly pop up to service the growing population. This helps increase property values as more residents continue to move in to the area, increasing the demand and establishing the community. A growing population is what every investor should be seeking.
5. Cost-control and customization
If you plan on purchasing a pre-construction property, you have the extra advantage of being able to customize the property to suit your needs. An obvious benefit of buying pre-construction property is that you can choose many of the features such as flooring, lighting, plumbing and fixtures. This is useful when you want to keep your costs down while making it as long-lasting and appealing to future tenants as possible. You can even choose your lot location in most new subdivisions. Your property can become your own creation.
6. New technology
Of course, new construction is going to have new technology. They offer better construction and more advanced, longer-lasting building materials than resale properties. Insulation technology provide better comfort and be energy-efficiency. The new and advanced heating and air conditioning systems will improve indoor air quality. This will definitely help investors to attract tenants.
So we talked about the benefits that investors have in purchasing new construction real estate. Now let’s list the major cities that are rapidly growing in new construction and offering for investors overwhelming real estate investing opportunities.
Development never stops in Houston, for it is the nation’s fourth largest city. This city is always on the top of the list for anyone looking for a real estate investing opportunity. Houston’s home inventory is increasing slightly, with fewer homes currently on the market. New construction in Houston is a more popular option for interested buyers. Real estate investors interested in buying new construction homes don’t have to wait for the home to be completely built, as there are many benefits to purchasing a home in the pre- or mid-construction phase. Houston takes #3 on Forbes’ list of Building Boom Towns as the metro area with the most new construction. This city with all its diversity in architecture and developed areas is definitely a winner.
San Francisco, California
With a growing population rate of 1.2%, this city is captivating to any investor looking to invest in real estate. Fifty of the country’s largest projects are being built in San Francisco, such as hospitals and office buildings. These projects also include public and private developments, as well as market-rate and affordable housing being built by the region’s largest contractors. With all its new construction development, San Francisco is growing in population and the housing demand opens up a variety of real estate investing opportunities.
Orlando is constantly undergoing new construction and constantly increasing in its population. This city with its high demand on real estate property will be the perfect opportunity for investors. New construction will increase house prices meaning that investors will gain a great amount of cash flow. The city is well known for its amusement parks, hotels and tourist areas. Keeping this mind, investors can use this as a helpful source for their investments. By purchasing a rental property, investors will benefit by renting their properties to tourists who come and enjoy Orlando in the summer.
For investors interested in purchasing new construction real estate, this city is perfect! Prices are still within reach and you can be sure the value of your investment will continue to grow as the housing market rebounds nationwide and locally in Seattle.
The next time you consider buying a property, be sure to consider a city’s traits including new construction. Cities are gradually increasing in new construction and becoming the center for many great real estate investing opportunities. Be sure to check out Mashvisor for the best cities to invest in real estate.