August 10, 2023

Post-Construction Profitability: Managing And Leveraging Completed Projects


Have you ever heard the phrase (or something similar): Real estate is a long game? If not, we will explain the meaning. Think of real estate as a plant. You research the types of seeds you would like to plant, prepare the soil (whether it's directly into the ground or a pot), plant, water, and feed. Even if you have never personally planted a seed, you can attest to the fact, that it will not sprout by the next morning, and you may spend quite some time nurturing the seed before anything happens, but still, you trust the process and when it finally sprouts, it may seem like it was overnight, but you know first hand the work it took. For that, you appreciate the results.

That is real estate. Specifically, we are going to discuss real estate investing and construction projects. It's a process that starts with a thought/plan (a seed) and has to be hammered (nurtured) into a thriving asset, that in one way or another makes you better.

The difference with real estate is the benefits are measured on a much larger scale.

Is Maximizing Profits Through Rental Management A Thing?

When investing in real estate, profit maximization is generally at the forefront in terms of individual goals and strategies. When investing in a construction property, it's expected to be an automatic profit margin. The project goes from the idea and development stages to a finished asset. This means that the associated value has increased. Depending on individual goals, the investor can sell the asset at that point or continue holding and profiting from the project through a long-term rental strategy.

Choosing to establish the completed project as a rental income can be lucrative and reliable. If choosing the latter, there is one very significant tip - set rental rates that can perform and deliver.

This means, pricing the property at a monthly rental rate that can keep up with the current market, attract eligible tenants and manage the upkeep and maintenance, as well as turn a profit. Considering this, there is no room for guessing. It is imperative to run a thorough market analysis to determine a competitive rental rate that will support the property, including you - Highlight the importance of setting competitive rental rates based on market analysis.

Why Is Property Maintenance And Upkeep So Important?

Avail released a report in 2022 exploring several factors that play a part in having a successful rental property. It was a tenant-focused report. The feedback disclosed that of the 1100+ residents who participated in the survey, 12% of those individuals cited property upkeep as a reason for non-renewal. Upkeep came in as the second-highest reason. Property maintenance and upkeep is the lifeblood of a rental property. It will attract the residents and keep them unless it's ill-management. In that case, it will repel quality tenants and run off responsible individuals who have decided to co-exist with extensive or unanswered maintenance issues.

One of the most effective ways to manage property maintenance is to either be a boots-on-the-ground landlord, or the best option, partner with an experienced and responsive management team who can help get the job done.

How Does Tenant Selection And Management Influence Profitability?

Tenant selection is a big part of turning a profit in a post-construction rental asset. Tenants, unknowingly (or maybe knowingly) play a role in the value of the asset. While maintenance and upkeep are highly important, even the best upkeep can not outpace an irresponsible tenant who treats the property with little respect and care. It's essential to run the tenant selection process from beginning to end including conducting all necessary verifications. On the other hand, it is necessary to take care of your tenant's needs and concerns associated with the property. A happy tenant will take pride in living on the property and treat it as their own.

How Can You Generate Optimal Profit Through Property Sales

Timing Is Everything When Selling An Asset. 

It's common for investors to sell construction projects once it has come online as ready asset, but it is also just as common for the assets to be sold later down the line. Regardless of when the decision is made, timing plays a major part. To determine if the market is favorable for the sale, run a market analysis and weigh your goals against the economy and market starts at the time.

Marketing Is Your Friend.

Marketing may seem like a gag phrase that's currently trending. It's anything but that. Marketing will make or break a property sale. Social media marketing, word of mouth, traditional flyers, and open houses are ways to gain awareness. The more exposure the property has, the better the odds are for a buyer who can make the desired difference in the profit margin.

Negotiation And Closing Is The Home Stretch.

A piece of real estate is as valuable as it can be negotiated and sold in an open market. With that, when in negotiations, understand that the buyer is attracted to the property because they feel it can do something of benefit for them. To employ effective negotiation skills, seek to understand what that may be, and that's where the negotiation begins.

How Can NREMG Help You Make The Most Of Your Post-Construction Project?

Investing in a construction project at the onset of construction or even post-construction presents an opportunity for maximizing profit potential. While the objective is to maximize the profit, it's important to remember that the process of doing so can be valid in several different ways, including maximizing profit through rental income or selling the property. Either way, a thorough understanding of all avenues will contribute to a more well-rounded profit strategy.

Are you looking to put a strategy in place for your post-construction project? Or, perhaps you may be interested in securing a construction project to focus on expansion and increased revenue. Either way, National Real Estate Management Group is an award-winning real estate brokerage. We are a full-service brokerage made up of a team of investors who are focused on educating and assisting fellow investors to walk into an elevated era of real estate investment. If this sounds like something you may benefit from, connect with us today, and let's discuss your current goals, and establish a game plan to help you reach them.