How to Build Wealth with New Construction Rentals

TL;DR

Donovan Adesoro, at 27, has built 25 homes by focusing on new construction duplexes, leveraging zero percent down loans, and partnering with investors. By using land as collateral for construction loans, he creates properties with significant equity. Donovan shares his process and strategies for building, funding, and selling new properties for profit.

Transcript

what's up everyone welcome to the Bigger Pockets podcast the biggest the best and the baddest real estate podcast in the world I am your host David green and I'm here with my skilled talented handsome buff and Brilliant co-host Rob abas solo thank you um I appreciate that that's what I needed on a Wednesday my friend how are you I'm good did I leav... Read More

Key Insights

• Donovan Adesoro started investing in duplexes right out of college, using a zero percent down loan program.
• The key to Donovan's strategy is building new properties, which avoids maintenance issues common in older homes.
• Using land as collateral for construction loans allows Donovan to finance projects without initial capital.
• Donovan partners with investors, offering them returns and a share of profits to fund land acquisition and permitting fees.
• New construction projects take about five to six months from foundation to completion.
• Optimizing square footage while maintaining attractive amenities helps maximize profit.
• Donovan targets young professionals as his primary buyers, often promoting the benefits of house hacking.
• Recent market changes have led Donovan to explore building duplexes with accessory dwelling units for increased profitability.

Questions & Answers

Q: How did Donovan Adesoro start his real estate investment journey?

Donovan Adesoro began his real estate investment journey by purchasing a duplex right out of college in 2020. He utilized a zero percent down loan program, which allowed him to house hack a new build with just $3,000 out of pocket. This initial investment set the foundation for his strategy in new construction.

Q: What is Donovan's strategy for building wealth in real estate?

Donovan's strategy involves building new construction duplexes, using land as collateral for construction loans, and partnering with investors for capital. This approach allows him to create properties with significant equity while avoiding the maintenance issues of older homes. He focuses on optimizing square footage and targeting young professionals as buyers.

Q: How does Donovan fund his new construction projects?

Donovan funds his new construction projects by partnering with investors who provide capital for land acquisition and permitting fees. He uses the land as collateral to secure construction loans, which cover the building costs. This model allows him to undertake projects without needing significant initial capital.

Q: Who are the typical buyers of Donovan's properties?

The typical buyers of Donovan's properties are young professionals, often in the age range of 25 to 35, who are looking to purchase their first home. Many are interested in house hacking, which Donovan promotes on his social media platforms, highlighting the benefits of living in one unit while renting out the other.

Q: What are some key benefits of new construction over buying existing properties?

New construction offers several benefits over buying existing properties, including avoiding maintenance issues common in older homes, creating properties with significant equity, and tailoring the design to current market demands. Donovan emphasizes that new builds can be more profitable by optimizing square footage and offering modern amenities.

Q: How has Donovan adapted to changes in the real estate market?

In response to market changes, Donovan has started exploring building duplexes with accessory dwelling units (ADUs) to increase profitability. This approach allows him to maximize the use of land and provide more units while still operating under residential permitting codes, which are quicker and cheaper than commercial ones.

Q: What challenges does Donovan face with new construction projects?

One challenge Donovan faces is the long payback period associated with new construction, as it involves permitting, land acquisition, and building before seeing tangible results. Additionally, changes in market conditions, such as land price increases and design demands, require him to continuously adapt his strategies to maintain profitability.

Q: What advice does Donovan offer to aspiring real estate investors?

Donovan advises aspiring real estate investors to focus on learning and gaining experience, which can be leveraged into larger projects in the future. He emphasizes the importance of optimizing costs, understanding market demands, and building strong partnerships with investors to secure the necessary capital for growth.

Summary & Key Takeaways

• Donovan Adesoro leverages zero percent down loans and investor partnerships to build new construction duplexes, creating significant equity and avoiding maintenance issues. His strategy involves using land as collateral for construction loans, with projects taking five to six months to complete.

• By optimizing square footage and targeting young professionals, Donovan maximizes his profits. He has built 25 homes by age 27 and continues to adapt to market changes, now exploring duplexes with accessory dwelling units.

• Donovan shares insights on building, funding, and selling new properties, emphasizing the importance of learning and gaining experience to leverage into larger projects in the future.