July 12, 2023

New Construction vs. Resale: Which Provides A Better Profit Potential?


Real estate investing has the potential to be a wealthy venture. Whether you are looking for a long-term or short-term earning opportunity, it’s there. It’s also one of the oldest and most proven avenues for building generational wealth, both short and long-term, making it obvious as to why.

It’s understandable as a whole, investing in real estate is generally a win-win situation, and there are multiple avenues in real estate investment. However, let’s explore two specific sectors of real estate investment: new construction and resale. Which one provides a better profit potential based on a few different factors such as cost, demand, and potential appreciation?

What Is The Difference Between New Construction And Resale Properties?

A new construction property is a property built from scratch using new materials and inspired by the current market trends. New construction investment properties can be single-family homes, often referred to as Built for Rent (BFR) properties. They are also multifamily properties with five or more units in one structure. However, they are generally known for their modern features, energy, and sustainability consciousness as well as other attractive qualities. On the other hand, resale properties are a little more aged, but can also be notable for the traditional qualities that are highly appreciated, especially in a more spacious floor plan, an already established community, and they often allow immediate occupancy. 

Determining the best route to take for the highest return on investment comes down to long-term goals, personal investing position, local market conditions, and even property location.

What Are The Pros And Cons Of Investing In New Construction Properties?

New construction properties are shinier and often more technological advancements, hence the term smart homes, whether it’s a single or multifamily property. Because of these valuable factors, they generally yield a higher profit. The new product alone attracts higher rents. When added value is factored into the process, it makes it that much more attractive. Some of the premium features include energy-saving measures along with more modern and sustainable building materials.

Additionally, new construction properties, in comparison to resale properties will require less maintenance, and a lot sooner than the average resale - making it that much more valuable in both the pockets of the investor and the eyes of the renter.

According to this survey, 79% of renters cared less for their landlords who were slow or rude about making repairs, versus 65% of renters who cared less for their landlords in response to increased rent. Considering this, new construction not only helps an investor save on maintenance costs, but also increases their popularity among their renters. The saved funds can be applied toward the profit margin and allocated to apply towards reinvesting in another valuable property. 

What Are The Pros And Cons Of Investing In Resale Properties?

Investing in resale properties also presents opportunities for real estate investors to generate a substantial profit margin. Resale properties are structures that are already in place, so there are no expected or unexpected material or labor delays. This gives a notable advantage of the potential for immediate occupancy. Immediate availability is a winning factor when in terms of profit potential. This allows investors to start generating rental income or sell the property without delay.

Resale properties offer value appreciation too. This aspect is particularly noticeable in fixer-upper style properties. These properties are more valuable when calculating their After Repair Value (ARV) vs. the purchase value. Investing in a distressed property along with significant renovation efforts such as cosmetic upgrades (flooring, painting, kitchen and bathroom improvements) can up the market value. An increased market value means selling at a higher price and increasing the profit margin. 

How Can NREMG Connect You To The Best New Construction And Resale Investment Opportunities?

For Investors looking for the best path between investing in new construction properties or resale properties to maximize profit, it’s important to remember that the determination of which is best is to weigh the facts. New construction offers a higher rent target and lower maintenance costs. Resale properties are great in generating income at a sooner rate because of immediate occupancy, along with room for a higher value appreciation following a renovation package. All in all, the best approach to truly understand the best options as an investor is to first connect with a reputable and knowledgeable market expert. Work with them to identify your investment goals and run risk analysis against potential investment opportunities. It’s important, when exploring your goals and evaluating the risk, to look at the situation on both a short and long-term basis. 

National Real Estate Management Group is a full-service investor-based brokerage that specializes in helping investors maximize their profit potential by successfully maneuvering the real estate market. We also help increase profit warning efforts by offering our clients effective property management services. We can do the same for you. Connect with a member of our team and let's discuss how we can help you elevate your real estate investment business.