Planning for profit: What investors must know before building

Construction costs in Croatia have significantly increased in recent years. The prices of materials, labor, permits, and design have all gone up, while on the other hand, buyers are not fully willing to bear that burden. The market has become more price-sensitive, and buyers are now more informed, discerning, and rational in their decisions.

In practice, this means that investors and developers are facing notably reduced margins. Conditions that once enabled double-digit returns are no longer the standard. Today, sustainable profitability is only possible through careful planning, clear market logic, and a strategic approach to each project. That’s why it has never been more important to set up the project properly - right from the initial idea.

Location and concept: The foundation of profitability

Choosing the right location remains the basic prerequisite for any successful investment. But equally important as where you build is what you build. The concept is the second critical pillar of ROI - and is often completely overlooked in practice.

Investors frequently leave concept development entirely to the architect or base it on personal impressions, without consulting those who are in daily contact with the end buyer. A good agent or broker knows the micro-location, buyer profile, demand level, and pricing psychology. This is exactly the kind of person who should be involved already in the conceptual phase.

A well-thought-out concept can salvage even a less-than-ideal location if it is tailored to its limitations and the real market framework. On the flip side, even the most attractive location can underperform if the wrong product is developed.

Defining the product, price, and costs

Before drafting the design, it is crucial to define exactly what is being built, who it is for, which market segment it targets, the achievable selling price, and the realistic construction costs.

In practice, it is common for investors to design a project based on personal preferences, build it, and then try to reach a selling price that supports their desired margin. But the market does not operate based on internal expectations - it follows real demand and buyer capacity. That’s why it is essential to first assess demand data and purchasing power, and then align everything else with it - floor plan, size, fit-out level, style, and cost breakdown.

Modern apartments with sea view - Rijeka

Market analysis and absorption rate

One of the most important - and most neglected - analyses is the absorption rate. This figure shows how many units of a certain type are sold on the market within a given period.

Every serious investor should know, before building, how many similar units are currently active on the market, how many are sold annually, how many are in the permitting phase, and how many will be available by the time the project is completed. For instance, if 20 villas with pools are sold annually in a certain region, but 40 are already listed and another 30 are under construction, it clearly indicates the market is approaching saturation.

Entering such a scenario without prior analysis leads to slow sales, price reductions, and significant pressure on profit margins. 

Avoiding market inertia and identifying unmet niches

The Croatian market often follows inertia. If everyone is building apartments - more apartments get built. If holiday homes are trending - everyone invests in holiday homes. This herd mentality frequently leads to saturation and fierce competition among similar products.

A smarter approach involves identifying market gaps - what’s missing yet in demand. In some regions, this might be smaller, sustainable units for couples. In others, mid-sized apartments with luxury touches, or perhaps thoughtfully planned resorts with added amenities. The key lies in data analysis, not trend-chasing.

Charming house with pool in a peaceful setting - Istria

Design, Aesthetics, and Emotional Impact

Today’s buyers aren’t just buying square meters. They’re buying an experience, a feeling, an atmosphere. The aesthetics of the space - from color palettes and finishes to lighting and proportions - heavily influence purchasing decisions.

That’s why interior design shouldn’t be left to chance or the investor’s personal taste. Professional solutions, in collaboration with interior designers, help create a product that is attractive, well thought out, and emotionally resonant. This is especially important in the premium and luxury segments.

In larger projects, building a mock-up apartment, house, or villa can offer a major advantage. A sample unit gives buyers a tangible sense of space and helps them imagine themselves in that environment. This greatly shortens the decision-making process and increases the chances of selling at the desired price.

Sales strategy vs. rental strategy: What comes first?

One of the more common mistakes seen on the market is the development of houses intended for short-term rental, which are then offered for sale as finished products. This strategy may make sense if rental income is the primary business model, but if the goal is to profit through sale, then the concept must fully serve that purpose.

Properties built for rental are rarely designed for sale. Their layout, quality of execution, choice of materials, and fit-out are tailored to operational use - not emotion or perceived value. Moreover, a used property on the market is no longer considered new, and many buyers are only interested in unused homes. If a property has been rented out, there is almost always an expectation of a lower price, which directly reduces the investor’s return.

So, if the plan is to profit through sale, the strategy must focus entirely on that goal. Rental may only serve as a temporary, short-term solution - and even then, with full awareness of its impact on market perception.

Villa with sea view and private pool near Labin

Profit is not built by chance - it is planned

In an environment of high input costs, rational buyers, and fierce competition, profit no longer generates itself. Achieving strong returns today requires solid analysis, precise product and segment definition, thoughtful design, and a realistic strategy.

If you’re considering building your own project and want to make informed decisions from the outset, professional consulting before entering the design and construction phase can be a key success factor. In a time of high competition and ever-increasing construction costs, there’s no room for costly miscalculations. That’s why having a reliable and experienced partner like Remington Real Estate is essential at the most critical stage - planning.

Our team is at your disposal for one-on-one consultations and support in shaping a strategy that delivers real results.

For more insight on what comes after development, be sure to read our blog Professional property preparation: The secret to a fast and secure sale - because a well-designed project deserves an equally strategic sale.

Author of the blog: Ivan Kovačić