As studies show that “single-family home construction has been rising steadily since it bottomed in 2009 during the Great Recession,” this would be an excellent time for investors to consider the benefits of ground-up construction loans. Whether developing a property from scratch or tearing down an existing structure to rebuild on the lot, ground-up construction can offer new avenues for investors who are having a hard time with the current state of inventory. If this is the investment path that currently makes the most sense for you, then these are some of the tips to keep in mind when scouting for prospective land to kickstart the construction.
Explore surrounding properties and communities
At the end of the day, your goal as an investor is for the property to sell. When looking for the right land, research the surrounding communities and properties to establish that it’s a valuable location that promises a strong ROI once the house is built and put up for sale. Research, also, what the local market looks like. Wide, open land may seem appealing to scoop up and develop, but it often appeals to a specific niche of people. Consider developing land that exists in a place that already draws buyers and renters because of a well-established (and thriving) community.
Consider the topography
This is mostly important because there is, to some degree, a greater level of planning that has to go into building a new construction home. Is the land sloped or flat? Is it uneven? What native vegetation exists onsite? Having the answers to these questions will guide you to building a property that’s best suited for the land. Considering things like flooding can make you realize that one particular site might not be worth the investment after all.
Consider the proximity to utility connections
If your goal is to buy land that can be easily transformed into an appealing prospect for any buyer, then you’re most likely going to stay away from investing in raw land, that is, land that is completely undeveloped. Considering things like utility connections and access to power, water, sewage, and cable (among other things) can adjust how and when the construction is successfully completed without unexpected heavy lifting on the front end.
Make sure you vet the property
The most basic research that you can do is that of zoning details to make sure the land can be used exactly how you intend to use it. Things like the size and shape of the home (or multifamily property) you are building must meet the local zoning requirements and understanding them can man the difference between successfully constructing and selling a property and experiencing expensive setbacks. Additionally, clearing and grading land can be a costly requirement to prepare the space for construction. Make sure you’re aware of any additional costs that might spring up before the real work begins.
Temple View Capital Funding, LP (“TVC Funding”) offers nationwide lending for ground-up construction loans for single-family, 1-4 units, as well as townhomes with 90%LTC. To learn more about the terms and opportunities, contact us today.