Investing in New Construction Homes: Building Wealth With Real Estate

 Investing in New Construction Homes: Building Wealth With Real Estate

What Is New Construction Real Estate Investing?

You’ve probably heard that real estate is one of the best ways to build long-term wealth. And investing in 

new construction homes can be an especially smart strategy. New construction offers some key 

advantages over existing homes that make it easier to profit. In this article, we’ll walk through the benefits 

of new construction investing and how you can get started building your real estate portfolio. You’ll learn 

insider tips on finding the best new home developments, negotiating with builders, and managing rental 

properties. We’ll also cover mistakes to avoid and alternatives like real estate investment trusts. If you’re 

ready to leverage new construction to grow your net worth, this guide will equip you with the knowledge 

you need to succeed. Let’s dive in and start mapping out your path to financial freedom through new

home investing.

Benefits of Investing in New Construction Homes

New construction real estate investing means buying pre-construction properties directly from 

homebuilders before the homes are even built.  As an investor, you get in early, often at a discount, and 

then sell for a profit once construction is complete.

Secure Properties at a Lower Cost

By buying pre-construction, you can typically get new homes at a 10-30% discount versus the retail price 

once built. Homebuilders offer these “pre-construction discounts” to secure buyers early on. As an 

investor, these savings go straight to your bottom line.

Less Competition From Buyers  

Buying pre-construction also means less competition from regular homebuyers.  Most buyers prefer to 

purchase homes they can see and touch.  By investing pre-construction, you beat the crowds and secure 

properties before the bidding wars start.   

Appreciation Potential

New construction homes often appreciate quickly since everything is brand new.  Once the homes are 

built and you sell, you can typically make a tidy profit from price appreciation in a short period of time. 

In strong housing markets, new construction homes may appreciate 10-30% in the first couple years.

Tax Benefits

There are also tax benefits to new construction real estate investing.  The depreciation on new properties 

can help offset the income from your investments and lower your taxes.  You can also defer capital gains 

taxes by using a 1031 exchange to roll your profits into the next deal.

New construction real estate investing does come with risks like timing the market properly and the 

possibility of property values decreasing.  However, for investors looking to build wealth through real 

estate, new construction homes can be very rewarding.  With solid research and the right strategy, you can 

successfully build your portfolio through new construction investing.

Types of New Construction Properties for Investors

Tax Advantages 

Investing in new construction homes offers some nice tax perks. Since the home has never been occupied, 

you can claim depreciation deductions on the property. You can deduct a portion of the home’s value each 

year, which helps reduce your taxable income. New homes also qualify for capital gains tax exemptions 

when you sell, allowing you to pocket more of the profits.

Higher Returns

Brand new homes often generate higher rents and sale prices compared to older properties. Tenants and 

buyers are willing to pay more for a home that’s modern, energy efficient, and low maintenance. As an 

investor, this means higher cash flow and greater potential for appreciation over time. Some new 

construction homes may qualify for government-backed mortgages as well, allowing buyers to put less 

money down.  

Lower Maintenance 

With new construction, you don’t have to worry about expensive repairs or replacements for many years. 

Components like the roof, windows, plumbing, and electrical are all brand new and covered under 

warranty. This peace of mind means lower maintenance costs and headaches for you as the investor and 

landlord. Your tenants will surely appreciate living in a place where everything works as it should!

    New construction real estate does come with risks like project delays or cost overruns that could cut 

into your profits. However, for many investors, the benefits of tax advantages, higher returns, and lower 

maintenance make new homes an attractive investment option, especially if you go in with realistic 

expectations. When you find the right property and run the numbers, new construction could be your 

ticket to building wealth through real estate.

Tips for Finding the Best New Construction Deals

As an investor in new construction real estate, you have several options to choose from based on your 

investment goals. Do you want to buy and hold for the long term? Flip quickly for a profit? Each type of 

property has pros and cons to consider.

Single-Family Homes

Single-family homes are a popular choice for buy-and-hold investors.  Families will always need housing, 

so there is consistent demand.  Plus, it’s easier to find tenants for this type of property.  However, single-

family homes typically require more maintenance and have higher costs.  If you plan to flip, profit

margins can be tighter.  

Townhomes and Condos  

Townhomes and condos are attractive options if you want less responsibility.  HOA fees cover exterior 

maintenance, landscaping, and amenities.  They also tend to appreciate steadily in value over time.  The 

downside is HOA fees reduce your cash flow, and it may be harder to find buyers or tenants for this type 

of property.  Condos, in particular, can be risky if the building falls into disrepair.  

Duplexes and Multi-Family  

Duplexes, triplexes, and small apartment buildings are great for generating income through rent 

payments.  Multiple units mean higher cash flow and a built-in customer base.  However, multi-family 

properties require more capital upfront and involve greater responsibilities as a landlord.  It also may take 

longer to sell a multi-family investment property.

    As with any real estate investment, do your homework to determine what types of new construction 

properties match your financial goals and risk tolerance.  Talk to investors already active in your local 

market and connect with builders to find good deals.  With the right property and strategy, new 

construction real estate can be an excellent way to build wealth over the long run.

Financing Your New Construction Investment Property

When looking to invest in new construction homes, finding the best deals requires patience and 

persistence. Here are some tips to help you score a great new construction investment property:

Shop Around at Different Developments  

Don’t settle for the first new construction community you see. Compare pricing, included features, and 

floor plans at different neighborhoods to find the best value. Some builders may be more flexible in their 

pricing or willing to upgrade certain features at no extra cost. Checking out multiple developments is the 

only way to know you’re getting the best deal.

Negotiate the Best Price

New construction homes often have more wiggle room for negotiating the asking price. Don’t be afraid to 

make an offer 10-15% below the listing price. Builders want to sell homes to keep their projects moving, 

so they may come down significantly on the price. You can also try asking for closing cost assistance or 

additional upgrades to be thrown in for free. The worst they can say is no, so make sure you ask!   

Consider Less Popular Floor Plans

The more unique floor plans in a community tend to be the last to sell. Opting for a quirkier layout may 

allow you to get a lower price since the builder will be motivated to sell. You can also ask if there are any 

lots left that are more difficult to build on, as the builder may discount those homes just to avoid being 

stuck with an empty lot.  

Buy at the End of the Development Stage  

New construction communities are developed in phases, with homes in the earlier phases often selling at 

a premium. If you wait to buy in one of the final phases, the builder will typically be offering the lowest 

prices in order to sell the remaining inventory. You may be able to take advantage of price drops of 

$20,000 or more versus homes sold in the first phases. Patience pays when new construction investing!

    With some smart shopping strategies, you can find new construction deals that will provide solid

returns and equity growth over the long run. Keep hunting in different neighborhoods and making 

competitive offers until you find the right investment property at a price that makes sense for your 

financial goals. The search will be worth it!

Working With Builders as a New Construction Investor

    When it comes to buying an investment property, financing is one of the biggest hurdles for most 

investors. New construction homes often come with additional challenges, like securing a construction 

loan. However, the rewards of new construction can make the extra effort worth it.

Construction Loans

Construction loans are short-term loans used to finance the building of a new home.  You’ll need to put 

down at least 20-25% as a down payment. The loan is disbursed in stages as construction progresses.  

Once the home is complete, you’ll need to convert the construction loan into a traditional mortgage. 

While construction loans have higher interest rates and fees, they allow you to lock in a price for the land 

and materials upfront.  

Mortgages

After construction is done, you’ll need to obtain a traditional mortgage to pay off your construction loan.  

Most lenders prefer that new construction is complete before approving a mortgage.  They will send an 

appraiser to determine the value of the finished property.  Be prepared to put at least 20% down on the 

mortgage.  Interest rates and terms for new construction mortgages are similar to existing home 

mortgages.  

Cash Offers

Some investors prefer to pay cash for new construction to avoid the hassle of financing.  If you have 

enough cash on hand, making an all-cash offer for a new build can be an attractive option.  Cash offers

are appealing to builders because they don’t have to worry about a buyer securing financing or an

appraisal coming in low.  As a result, cash buyers may be able to negotiate a lower price.  You also have 

more flexibility to customize the home to your specifications.  

    While new construction financing requires patience and a bigger down payment, the rewards of a brand-

new investment property can be well worth the extra effort.  With interest rates at historic lows, now is an 

excellent time to take advantage of financing for your new real estate investment.

Staging and Marketing New Construction Listings to Attract Homebuyers

    Builders are the key to unlocking opportunity in new construction real estate.  As an investor, 

developing relationships with builders in your area is crucial to gaining access to properties before they

hit the open market.  

Build Rapport and Express Interest 

Reach out to builders and express your interest in their new construction projects. Explain that you’re an 

investor looking for opportunities to purchase properties, and you’d like to get in early on their 

developments. Builders are typically receptive to investors, since you represent a ready and willing buyer. 

Be professional, communicate clearly, and try to build rapport and trust with the builders. The more they 

know you, the more likely they’ll think of you first when new properties become available.

Negotiate the Best Deal

Once a builder alerts you to an available new construction property, act fast but don’t feel rushed into a 

purchase.  Negotiate the best deal you can.  Builders often prefer selling to investors before listing a 

property on the open market, so you have leverage to ask for incentives like price reductions, closing cost 

credits, or upgrades.  Have a maximum price in mind, and don’t be afraid to walk away if you can’t get a 

deal that fits your investment criteria.  There will always be more opportunities, so stay patient and don’t 

settle.

Make it a Win-Win

 The key to maintaining strong relationships with builders is making each deal a win-win. Focus on being 

a low-maintenance buyer, closing on time, and not nickel-and-diming the builder. Your professionalism 

and reliability will make them want to work with you again and again.  And of course, once you purchase 

the property, work to resell or rent it as quickly as possible so the builder sees how you add value as an 

investor.  With the right approach, new construction real estate investing can lead to a pipeline of deals 

and partnerships that fuel your success for years to come.

New Construction Investment Exit Strategies

To sell new construction homes quickly, savvy real estate investors carefully stage and market the 

properties to attract interested buyers. Staging involves preparing the home to showcase its best features, 

while marketing spreads the word to potential buyers.

Stage the Space

Walk through the new construction home and think like a buyer. Pay attention to details that make a good 

first impression. Make sure the floors are clean and clutter-free.  Paint the walls in neutral, appealing 

colors. Ensure all outlets, switches, and fixtures are installed and working properly.  You only have one 

chance to make a first impression, so take time to get the staging right.  

Highlight Key Features

Draw attention to key features of the new construction home that will attract buyers, such as an open floor 

plan, spacious kitchen, luxury master suite, or outdoor living area.  You might group furniture to create 

separate spaces within an open floor plan.  Style the kitchen and bathrooms to look elegant yet 

functional. Accentuate architectural details like high ceilings, lots of windows, or exposed wood beams.  

Focus the buyer’s eye on aspects of the home you want to emphasize.

Spread the Word

Employ a multi-pronged approach to marketing new construction listings.  List the property on websites 

like Zillow, Trulia, and your local MLS.  Advertise on social media platforms where potential

homebuyers spend time, like Facebook Marketplace and Instagram.  Put a “For Sale” sign in the front 

yard and open house signs at key intersections.  Send email blasts to your contact list.  The more people 

who see the listing, the more interest you’ll generate in the new construction home.

Proper staging and strategic marketing of new construction homes will attract enthusiastic buyers.  With 

the right preparation and promotion, investors can sell their new construction listings quickly and for top 

dollar.

FAQs About Investing in New Construction Homes

When you invest in new construction homes, having a solid exit strategy in place from the beginning is 

key. There are a few options to consider to build wealth and maximize your returns.    

One of the most common exit strategies is to sell the property once construction is complete.  New homes 

often appraise higher immediately after being built, allowing you to potentially sell at a profit. You can 

list the home yourself or work with a real estate agent to market the property to prospective buyers. With 

some luck, you may be able to sell quickly and earn a sizable return on your initial investment.   

Another option is to rent out the new home.  Becoming a landlord provides ongoing cash flow and 

income over time.  New homes also often command higher rents, especially in desirable, growing 

neighborhoods.  Over time, your property value may increase substantially, allowing you to sell for a 

large profit years down the road.  Of course, being a landlord also means responsibilities like managing 

tenants, repairs, maintenance, and vacancies.  Make sure you understand all that is involved before 

becoming a landlord.

Some investors choose to refinance the new home and pull cash out for another investment.  If 

construction costs were low and property values have increased, you may be able to refinance for more 

than you owe and pocket the difference.  You can then use that money to fund your next real estate deal.  

Refinancing does mean you have to qualify for a new mortgage and your payments may increase, so run 

the numbers to ensure it makes financial sense.  

For the most tax-advantaged exit, consider exchanging your new home for another investment property. 

A 1031 exchange allows you to defer capital gains taxes by trading one investment property for another.  

You have to follow strict rules, but if done properly, you can build wealth over time without losing a big 

chunk to taxes each time you sell.  

With the right exit strategy in place, investing in new construction homes can be extremely rewarding.  

Think through your options, know your numbers, and be ready to act when the time is right to maximize 

your profits.

  As an experienced full-time Luxury & New Construction Realtor, servicing the state of 

Massachusetts; it will be an honor to support you to buy your first home. Whether as a first time 

homebuyer, investor or a dream home-builder; my team and I can support you to navigate the

home buying process seamlessly.Visit www.kimberlyadegokehomes.com to learn more.