Investing in construction projects is one of the best ways to earn a good sum of money. Here are some tips that can help you choose the right projects and maximize your earnings.
Compare properties
When investing in construction projects, you should be careful and compare your options. For instance, properties can be undeveloped land without any improvement or planning done by the current owner. Developed properties might be fully planned or zoned with streets and utilities already in place. Expect such properties to be more expensive than undeveloped land.
Purchasing undeveloped land needs a lot of due diligence to ensure that the land is surveyed properly. The land can be developed with utilities and streets, and then sold to builders who build houses for rent or for sale. The cost of properties increases as each development phase is completed.
Know the competition
The competition depends on the size of the project and its use. Commercial developments for retail sites, offices, and apartments are more expensive than a single, raw residential land. Competition from veteran investors may show that the project is worthy of being considered. It's also important that you understand the housing market.
You cannot predict something catastrophic, such as a housing market crash. When this happens, you could lose your investment. Find an experienced builder, as their chances of cancelling a construction project are lower than that of a startup. Look for a company that will buy your lot to build a house, or contract your property. When the supply of vacant land increases, you can expect the market price of your lot to go up as well.
Ask if the construction company has a surety bondA surety bond provides protection by eliminating unqualified contractors. Before a construction company can get a surety bond, they go through a strict prequalification process to determine whether theyre capable of executing a given contract. Since the bonding capacity of the company affects their ability to get work, they give more information to the surety provider. If the construction company has a surety bond, you can have peace of mind knowing that they can finish the job within the specified schedule.
Verify zoning restrictions
Make sure that the property can be used for your desired purpose. You can ask the selling agent about land use laws and zoning restrictions for the property. If the agent is unsure about the zoning laws in the area, you should contact the county or city government. In case you're buying an undeveloped lot, have it re-surveyed first to determine and verify where the property line is.
Dont forget to conduct your own research
If you're working with a real estate agent, make sure they're telling the truth about a purportedly budding area. You should do your own research, by asking local businesses if the place is indeed growing. Since the real estate agent wants to close the deal as soon as possible, you may only get a couple of days to make a decision. Make it clear to the agent that you want to have several real estate properties to pick from. This will help you evaluate up-front costs and long term returns.
