Should I build my first investment home now?

Question

Hello,

So I want to build my first investment property , but I don't know if it's a good time to build. I will be living in it and renting out the two other rooms. It will be a 3 bed/2 bath, 1,500 square feet (living area) in Texas. What are y'alls' thoughts? How much is wood/supplies right now? Any developers out there?

Thanks in advance.

V.G Jason · Answer

Builders are just looking to dump. I'm getting looks in Austin daily, I just have no needs. I think I was on some list from years ago, not sure how to get off, but I get asked way too often. I pass the leads, have gotten a few of my friends to buy some and at huge discounts. Lots of new constructions in Dallas, Austin, Raleigh, even Phoenix , you're in FW, you can definitely get someone to dump.

Scott E. · Answer

That family member must really love you. It is a LOT of work and takes a LOT of time to build a house, even for an experienced developer who has a team in place. Although part of why he/she might be offering this is because they want to keep their workers busy.

It's a fine time to build right now. Prices of everything are starting to tick down a bit (but mainly lumber and labor). And with a brand new home you will have less repairs, maintenance, and cap ex to worry about in the short term.

I agree with @Nathan Gesner ... You should go for it as long as the numbers make sense.

Jewel B. · Answer

People got spoiled on the super low interest rates. Interest rates now are pretty average historically, even slightly lower. You can always refinance later. If the numbers work, they work. Don't obsess to much over interest rates. You can also negotiate lower purchase price.

Nathan Gesner · Answer

It's normally much cheaper to buy something existing and fix it up, but if the builder is doing it for cost of materials then I would accept the offer.

Justin Brickman · Answer

I would look to purchase a new build or something already constructed. Builders are offering heavy discounts because of the extra inventory

Oddy Kham · Answer

It’s a slang word to sell quick at a discount.

Blanca Munoz · Answer

What does dump mean?  I'm new to this.

Joseph Crunkilton · Answer

If it makes dollars, it makes sense. If the numbers work it's always a good time to buy.

Mohammed Rahman · Answer

Hey @Blanca Munoz - good luck with your new project!

Here's other things that might work for you to get a clearer estimate on costs:

- attend a local real estate event and ask people for introductions to builders/contractors. They will be better able to give you an idea of the current landscape in regards to costs, market, etc.

- visit your nearest Home Depot, ask them what the price for materials is. Let them know you're planning on building a house, and they'll be able to give you more insight as they work with a lot of contractors that come in the early morning before heading to their job sites.

Good luck.

Manny Vasquez · Answer

If you want to start with your investment property NOW, then buy from a home-builder.  Right now, they are providing all kinds of incentives like upgrades to flooring, upgrades to your kitchen/master bedroom/landscaping and they are also paying for closing costs and/or interest rate buy-downs.  Builders know that we are in a declining market and they need to sell now.  With the right conversation (and a desperate builder) you may be able to get a combination of upgrades, closings costs and favorable interest rates.

Building your own investment property will take about 3-4 months, in the absolute best circumstances.  More than likely, I would "double" that estimated time, just in case.  If you start building now, you are very likely to see the finishing of that new-build around May/June time frame.  It is monumental work that needs to be done and if your family member is going to be doing all of the work.....obtaining architectural/engineering drawings, submitting them to the city/county, obtaining permits, working with the inspectors.....or if you have to chase everything down, just keep in mind that it all takes time and someone has to do it.

Or you can try a hybrid of the above two scenarios.....buy a "lived-in" property and have your family member remodel it to your liking.  More than likely, this will be faster than building an entire property and you also customize your home to your liking.  At the time of purchase, you can also negotiate with the seller to possibly pay closing costs, repair some items, etc.

Good luck!

Should I build my first investment home now?

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