Analyzing New Construction Investments: What to look for?
When looking into real estate investments, in particular, residential investments, there are some key components you must take into consideration. You must decide if you are going to invest in real estate that is ready to sell as is with minor maintenance and repairs needed or do you want to invest in a property that may be cheaper but will need a far more expensive repair strategy. Both ways offer money making alternatives but adding new construction can become an unnecessary hassle if not properly analyzed beforehand.
How do I analyze new construction investments?
When searching within new construction properties pay close attention to a few key factors:
Price of the investment
How much customization is allowed
Clearly, document amenities and titles
Other risk factors that must be considered when you make your initial analysis include:
Delay in possession
No awareness about the neighborhood
Increases in costs
These are all important factors to consider when looking into new construction investments. As you get closer to making the deal you will also need to find important details about the location and access to necessary repair companies who can get the job done quickly but at a reasonable rate. When you analyze the property you should look closely at five things.
Review recent survey and appraisal report for old constructions, this also includes property deeds.
Calculate monthly maintenance costs, you will also be responsible for any outstanding dues and taxes from past owners. These costs can affect your cash flow.
Locate and hire a quality construction company that can provide photos of prior projects and has a strong reputation for working with new construction investments.
What will be your additional expenses? Knowing whether you will be investing in an on-lease property (possessed by others) is important. You should know if the rent is controlled, stabilized or within a free market. Leasing agreements and tenants rights are also important aspects to consider prior to purchasing a new construction investment.
Will you be adding furniture, equipment or other amenities to the property?
New construction investments can be extremely lucrative if done in the proper manner. By taking into consideration these many factors prior to your purchase can save you time and money on the lifetime of your investment. Properly analyzing your investment affords you the opportunity to be creative and forward thinking once you decide on the direction of your construction needs. You will be able to secure renters by creating an investment that suits the demographic and community where your newly renovated property will reside.
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