It’s no secret that we’re living in unprecedented times. Spending on private residential and non-residential construction projects grew at a rapid pace from 2020 to 2021. The private sector construction spending has amounted to $1.14 trillion according to a report by Statista , published on March 2021. Another report suggests that the US’s Civil engineering construction spending is predicted to increase to $371.6 billion by 2022.
The value of street construction and the new highway is projected to reach around$108 billion by 2024, which is the highest documented value since 2005. Construction spending on other non-residential projects is also expected to grow to $473 billion in 2024.
About residential projects, Statista indicates that nearly 6.5 million residential homes were sold in the US in 2020. The same report indicates that this figure is expected to reach around 7.1 million by the end of 2021.
The COVID-19 pandemic undeniably brought the worldwide economy to a standstill. Industry experts, however, believe that real estate projects can generate considerable returns during these uncertain times. Central banks are state governments have also started providing tax reliefs and have reduced residential mortgage rates.
Investing in Construction Projects
In today’s economic landscape, the construction industry has become one of the best industries for investments. The construction industry isn’t just limited to home building, but also includes real estate developments, buildings, street building, developing telecom infrastructure, repair and remodel services, etc.,
Investors worldwide are rapidly investing in the construction of recreational centers, hospitals, brand outlets, office buildings, restaurants, and food centers. There are primarily two major types of constructions, namely; residential construction and commercial construction.
While residential construction refers to the construction of homes, apartments, or private living quarters, commercial construction exclusively deals with the construction of properties used for commercial and business activities.
Benefits of Investing in Construction Projects
Let’s look at some benefits of investing in newly launched construction projects for real estate owners.
Income Potential
Investing in construction projects allows you to increase your income. They offer considerable earning potential, especially if you’re investing in a commercial property. Commercial properties typically offer a higher annual ROI.
You can purchase pre-construction properties at lower rates. The more demanding a project may seem initially, the higher return it offers in the long run.
First Mover Advantage
If you’re the first purchaser of a residential or commercial property, you can get an advantage with a reduced amount.
When a residential property is under the pre-construction phase, its price is considerably cheaper because of the fixed rate. Many people in the US prefer purchasing beach view properties and investing in these residential properties is considered a safe investment.
Financially Convenient Option
If you purchase a property in its pre-construction phase, you won’t have to pay the mortgages before the property’s registration.
When you purchase a furnished home or commercial real-estate property, you need to pay a fixed percentage deposit at the time of the purchase. However, you can save this money, by purchasing it before the construction. This way, you’ll have sufficient time to save money for the installments.
Maintenance Costs
Maintenance is typically viewed as a sunk cost by most entrepreneurs. To reduce maintenance costs, invest in a construction project and use high-quality materials for the construction. This process is also called preventive maintenance.
Old commercial and residential properties require high maintenance. You can save maintenance costs by investing in constructing a property or by purchasing a pre-constructed home.
Minimum Competition
Most property sellers sell their properties to liquid their savings. Investing in underway projects may be extremely risky but they’re typically more economical than their rates after the construction.
If you invest in the construction of a project, you’ll probably purchase it off-market, without any broker’s interference. As a result, these investments offer little or no competition,
Professionalism
When you invest in the construction of a commercial property, you get an opportunity to work with LLC's and corporate organizations.
Working with corporate firms helps you learn your different operations are handled at a corporate level. From hiring the right construction firm to its management after the construction, every task will be accomplished professionally. You won’t have to deal with incompetent or temperamental individuals.
Customization
While purchasing a ready-made home or commercial property, you’ll have to accept it on an as-is basis. However, if you invest in its construction, you’ll be able to design and build it on your terms. You can configure the space and rooms according to the latest trend, your comfort, and your convenience. You can also decide on different characteristics such as the furniture, flooring, and wall paints.
Smart Investment
It’s All About the Location
If you belong to the real estate industry, you might have heard this cliché a million times in your professional career.
Regardless of what time you’re investing in a property, its location plays a primary role in determining the number of profits it will offer you in the coming years. Investing in a commercial property in a burgeoning area that offers rapid appreciation is your best bet. Try investing in a property located in the outskirts of a city so the neighborhood can also develop further with the property.
About the Author
John, the author of this post is an experienced real estate investor and well-versed in different types of mortgages and private lending options available in the US. He regularly contributes to the website of Insula Capital Group and helps people understand the ins and outs of the real estate business.
For more details, head over to the Insula Capital Group’s website. The company also offers private lending and real estate investment solutions nationwide. The private residential mortgage lenders provide hard money construction loans, fix and flip loans, business bridge loans, and hard money mortgages.
0
