Blueprint to Building Wealth: New Construction Strategies for Real Estate Investors

In today’s economy, investors can often find themselves asking what’s the best course of action to scale their portfolio. Should we be building new construction? Should we be buying move-in ready rentals? Or should we just be buying and renovating—to either flip or keep as a rental? It’s important to note that a lot of the economic drivers that investors are using involve being more selective, both in how they choose to develop projects and where they choose to do so. And this is mostly due to how tumultuous the housing market has been over the past few years.   

Mailena Garcia, Loan Officer, VP at Asset Based Lending breaks down new construction strategies for investors in 2026 in our most recent webinar. Read more to see how she discusses current market overview and trends, how investors have adjusted to today’s market, deal underwriting and more.  

How are Investors Adjusting Their New Construction Strategies? 

When it comes to new construction, investors want to make sure to do their market research to ensure they’re not going into an area that’s already over saturated. They also want to focus on interest rate costs, because a higher interest rate is going to equate to higher carrying costs. Limiting the carrying cost as much as possible will in turn allow investors to profit from their deal as much as possible.  

In order to adjust to the current market, investors have prioritized shortening project timelines, becoming more conservative on after repair values (ARV), and pivoting to rental strategies instead of putting properties on the market for sale. Turning a property into a rental could be a short-term or long-term solution, which ultimately depends on the investors’ specific goals. Refinancing and exiting your construction loan allows you to occupy the property with a tenant, giving you both room for profit and the opportunity to pivot later once the market changes.  Regardless, it’s always good to have your exit plan in mind. Make sure you’re talking about your financing flexibility ahead of time and looking at your project timelines.  

How Labor & Material Costs Affect the Housing Market  

Investors know well how labor shortages can directly impact project timelines; when labor is not consistent or reliable, a timeline could be extended by weeks or even months. Likewise, when material costs become less predictable, investors need to be sure they’re budgeting correctly. It’s not unlikely for materials to rise in cost after a project’s budget has already been set. And once a loan is closed, investors are unable to make budget changes unless they fully refinance the loan. Experienced investors know to look at cost and plan their budget to be prepared for “just in case” scenarios. They make sure they’re looking at their material costs in detail and pricing things out with different vendors for the best prices possible.  

As a part of their new construction strategies, investors should always keep in mind the contractors they work with and their availability. Vetting a contractor before signing to work with them can make or break a project timeline. A lot of delays on the contractors’ ends could result in major project delays or even uncompleted work. Ask questions ahead of time and always make sure to get their license, insurance, and have a contract in place with a definitive timeline. When you’re speaking to a contractor, you should have steps in place for delays to ensure your bases are covered.  

New Construction Strategy Overview: What to Watch for in the Market  

With the ever-shifting nature of the housing market, there are multiple things investors should be keeping track of as they take on new construction projects.  

• Rate Direction: Rate drops can unlock more buyer demand and improve exit opportunities.
  
• Inventory Levels: Low housing supply continues to support prices—but if inventory rises, margins could tighten further. 
  
• Exit Strategy Shifts: Remember that if you can’t flip it immediately, ask yourself if you could rent it instead. Build-to-rent and BRRR strategies are becoming more common. 
  
• Local Market Variability: Real estate is hyper-local and so your strategies should reflect your location—some markets are still very strong for flips, while others favor rentals.  

Understanding the Investment in New Construction Strategies  

When choosing new construction, investors know to weigh the pros and cons versus renovating an existing property. And those considering new construction strategies often choose new construction for a few reasons:  

• Higher Value Add: Buyers and renters are much more likely to spend more or pay a higher rent for a property that is brand new in comparison to a property that is a little bit older. 
  
• Stronger Resale Premiums: New construction will often sell higher than older properties (the exception being when older properties feature high-end or fully customed renovations). 
  
• Tailwinds from Demographics: Understanding the demographics of buyers/renters in your location and being in a market that allows you to pivot can create more opportunities when you’re selling to a demographic that favors new construction.  

Deal Underwriting for New Construction 

At Asset Based Lending, underwriting is all done in-house by a highly skilled team of underwriters. Once you submit a deal to your loan officer, the deal is then submitted to underwriting and an underwriter will speak with you directly. An underwriter will go over your deal with you and offer suggestions or advice as needed to help you make informed decisions. 

Here are some key elements to look out for when your loan is going through the underwriting process:  

• Land Cost: Make sure that you are running comparison pricing and that you are not overpaying for what you’re getting. 
  
• Hard & Soft Construction Costs: Soft costs include permits, engineers, surveys, impact fees, and so on. Hard costs include foundation, flooring, cabinets, appliances, and more. 
  
• Carrying Costs: Make sure to factor in carrying costs so you know how much money you’re actually going to earn in profit. 
  
• ARV – Sales/Rental Assumptions: Even if your plan isn’t to keep the property as a rental, ABL still keeps this information on hand to allow you to pivot to renting if necessary to ensure your project is still profitable. 
  
• Profit Margin Expectations: Make sure that you’re actually going to make money on your deal. Calculate everything ahead of time to have an appropriate expectation of your profit margin. 
  
• Common Investor Mistakes: Don’t underestimate your total cost or exit value, don’t lose track of your project’s timeline, and don’t forget to vet contractors to ensure they’re reliable.  

Explore More on New Construction Strategies with Asset Based Lending  

A full recording of the webinar, Blueprint to Building Wealth: New Construction Strategies for Real Estate Investors with Mailena Garcia, is available on YouTube. You can click here to watch it now or bookmark for later, to get even more insights into the world of new construction.  

And if you’re interested in partnering with Asset Based Lending on your next new construction project, you can pre-qualify now. Let’s get started and see how we can help you scale your portfolio today.