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Business in Construction - How to Invest in Real Estate

Have you ever wondered about making money building houses and selling them or renting them out? There are several options for investing in real estate and we look at the pros and cons of these, as well as what you need to know when building a house to sell for profit.

Fortress Home, a family-owned construction company based in Chicago, has over 20 years of experience in both the residential and commercial construction industry in our beautiful city. We have partnered with many property investors to help them invest in new construction properties.


Working with our trusted construction business will mean you're in safe hands. Contact us now to discuss your construction business ideas: +773-770-8607 or [email protected] With so many countries operating on the market, sometimes it’s not so easy to find “the best home buiders near me”.

Opportunities to invest in construction

If you own a plot of land or an older building you're already ahead of the game when it comes to investing in property. Property is generally a very stable investment and through real estate construction, you have the option of generating a regular income through renting out your new building or benefitting from property appreciation and selling for a lump sum profit.

Single-family homes

Building a new home to sell or rent out might be one of the first ideas that spring to mind but it may not be the right one for you. Here are the pros and cons of a building and selling houses business.

Pros

  • If you already own a smaller plot of land it can be one of the more affordable investments. You can build a single-family home from $100,000 upwards.
  • You can choose to rent out the property or sell it, depending on the housing market in your area.
  • If you choose the right area and type of home there is potential for a sound profit.
  • In some areas, a single-family home could make a lot of income as a holiday rental.

Cons

  • If you need to borrow money for construction, banks may be hesitant to lend for only a single house, which might not always be occupied bringing in rent.
  • If you are building to sell you are at the mercy of the property market, which can drop heavily during a recession.
 

Multi-family homes

Multi-family homes or apartments can be great investment opportunities for people looking for a regular passive income.

Pros

  • Lenders look more favorably on financing multi-family properties as there is more likely to be a steady income stream from multiple rental units.
  • You have the option to sell some units and rent out others, depending on your investment strategy.
  • You can hand over the management of your building to a property manager, meaning that you don't have to deal with the day-to-day issues of being a landlord.

Cons

  • The initial cost of construction will be much higher than single-family units, so you have to be prepared to take on more risk.
  • Finding a reliable, affordable property manager or management company can be difficult depending on where you are located.
  • A multi-family building may not be an appealing prospect to residents in every town or neighborhood.
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Commercial buildings

If you are considering talking to construction companies about developing commercial space there are several factors you should consider.

Pros

  • Commercial developments are often larger than residential ones so you will benefit from economies of scale.
  • If you do your research and choose your development wisely you can secure a large, regular income stream from your investment.
  • Businesses usually remain in commercial rental units for longer than residential rental customers, especially if your property is in a prime location.
  • Commercial leases are generally for 3-5 years, as opposed to shorter 1-year residential leases.
  • Landlords of commercial properties generally have more rights than those of residential properties, where the tenants have more protections and rights.

Cons

  • Your upfront investment is likely to be very high, depending on the type of commercial property you're looking at.
  • Commercial unit rentals can be more sensitive to market downturns than residential properties.
 

Remodeling and upgrading

While there are a lot of pros of investing in new construction if you already happen to own an older building, renovating it and modernizing it can be a great way to start or build your business in construction, with a lower up-front investment.

Making improvements to a building, and installing high-end amenities, especially in an area that is becoming more desirable, can enable you to attract a different group of target customers and charge much higher rents.

Making money building houses and selling them — what to consider

When starting your own construction-related business or investing in property you need to take many factors into account before you start to build a house to sell or rent.

Market research

To have a successful business it's vitally important you understand the local real estate market and what types of property are in high demand. Market research should not be skipped when starting a small business or investing in real estate.

  • What is selling well?
  • What is the rental market?
  • What is the local market cycle?
  • Who are your target market and potential customers?
 

You can check local industry publications to learn more about the property market.

Solid business plan

Your business plan and investment plans are not to be taken lightly. Spend time making sure you cover all the details and understand all the costs and risks, and have a good idea of what returns you can expect on your investment.

Be clear about what your goals are:

  • Are you looking for a regular income from renting or a lump sum from selling?
  • How much income do you need and is that achievable based on the property you're building?
  • What are your timescales and are they realistic?
 

Find financing

You'll probably need to secure funding to cover the construction costs, and as a private investor, you can approach private lenders for construction loans.

We recommend getting your loan pre-approved, so you can move more swiftly when the right opportunity appears, but you will need a business plan when you speak to your bank or lender. You'll also find it much easier to find financing if you have a 20% downpayment.


Choose the right construction company

When working with a local construction business you want to make sure they have a solid track record in the type of property you are planning to build, and ideally understand the local market. They may be able to advise you on your construction business idea as well.

It's important to work with a well-established construction business near me rather than a new business, as they will have solid supplier relationships, making sure you get the best price on building materials, as well as a strong team to help make your vision a reality. Make sure they are licensed and have general liability insurance above the cost of your project.

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How Fortress Home can help you invest in construction projects

At Fortress Home we have many years of experience in the construction industry in Chicago and will share our expertise with you throughout your construction projects.

Market knowledge

With our years of experience in the local real estate market, we can help you evaluate your preferred neighborhoods for their suitability for the type of project you are looking at.

Our team can also advise on the amenities, finishes, and landscaping that will appeal to your target customers, making sure your business plan goals are achieved with regard to the target market.

We can advise you on land survey services, zoning, and local building regulations for the type of property you are planning.

Budgeting

After discussing your plans and requirements we will put together a comprehensive budget for you, detailing optional upgrades for various finishes and floor plans.

We will work with you to ensure your budget and our costs match up, and you get the best possible value for money while ensuring the highest possible quality construction.

Once your budget is in place you can secure financing before construction starts.

Construction management and construction

When we start a construction project you can trust us to manage every aspect of the construction site as your general contractor:

  • Source and purchase materials
  • Hire employees (although most of our team is permanently employed)
  • Bring in construction equipment
  • Manage everything on the construction sites
  • Manage health and safety
 

We ensure all our buildings are made with the highest standard of reinforcement systems and highly effective waterproof materials to ensure your investment will require very little maintenance for many years to come.

We also make sure all of our projects use energy-efficient materials and building techniques where possible: we make sure all our buildings are well insulated and use LED bulbs and high energy-efficiency appliances.


Completion

Due to our extensive knowledge of the Chicago building codes and our quality assurance processes, our buildings pass inspection without the need for multiple safety checks and repeat inspections. This helps ensure your project is finished on time.

Once we have carried out a final walkthrough with you and you are happy that everything is completed to your satisfaction we will hand the property over to you. Now you can begin to put in place your marketing strategy for selling or renting out your new units.

Frequently Asked Questions

Is it profitable to build a house and sell it?

If you do your homework and build the right house in an upcoming neighborhood it can be very profitable to build a house and then sell it. It's very important to do your homework and understand the local property market, your target customers, and the exact neighborhood where you're planning to build.

It's also important to be prepared for your new property to take a little while to sell (no one can predict the future 100%) so make sure your business plan and budgets include some contingency funds for this type of eventuality.

Is construction a profitable business?

Starting your own construction business can be profitable if you plan well in advance. The construction industry is growing so there are many opportunities for construction companies to thrive, but many go out of business in the first few years.

When starting your own construction company you need to truly understand your local market and have a solid business plan in place, in order to succeed.

Is flipping houses a profitable business?

Flipping houses can be a very successful business if you know what you are doing. Like any other new business, starting to flip houses requires a lot of planning and understanding of the local property market, including its ups and downs.

You should also be careful not to underestimate how much time and money it will take to convert your project house into a dream home.

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FORTRESS HOME

Fortress Home combines the roles of a general contractor, a construction partner, and a construction manager. Our talented workforce helps us professionally manage all aspects of on-site construction.

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