Building New and Holding - Yes or No?

[Eric Struben]

I have a question. I have the opportunity to build a brand new duplex at a good price ($300,000 would like appraise for over $400,000, and would bring in around $1,000 per door), but my cash flow on the property would not be fantastic and maybe just break even. The upsides I see are leverage, and could even sell the property if I ended up digging a hole. Also to be known is this property would be built in Homer, Alaska and I have great PM's that would look over the property. I was looking at some properties more around where I live (Portland, OR) but was having a hard time finding properties that would cash flow nicely, and that were in good enough condition. I found one that I was able to get the seller to agree to a price that honored the 1% rule - but ended up backing out because it was pretty run down. It had long term tenants - but not a place I would necessarily feel good about renting to someone. I also do not have time at this point in my life to rehab a place - otherwise that would probably be the way to go.

The million dollar question... Do I build new for a discounted price, or keep looking for a place around me that will likely not be in the best condition (my price tag is near/under $300k).