New construction vs existing

[Briana May]

Hello!

I am currently looking into possibly buying SFH for buy/hold vs. doing new construction (buy/hold). The city I am currently in has lots of plots of land for sale that are fit for a SFH. I am looking at affordable housing some I may think of doing section 8. The City currently owns the land and is selling it for cheap (anywhere between $500-$5000) per lot. The lot must have a SFH on it within 9 mo and can be kept and used as a rental. I was thinking of doing this as my first venture. I have a very trustworthy contractor on my team who has been in busy for many years.

This would be my first property. I am not looking for easy I am looking for profitability and I am in the real estate game for the long haul. 

So what are your thoughts new construction or existing? Anyone done this and have any pros/cons?

[Will Fraser]

Hi @Briana May, this is a cool idea!  The thing I love about new construction is that everything in the home is on year 0 of its useful lifecycle when you start out with the very first tenant.  That's a beautiful thing!

Pros to this plan:

• The lifecycle thing
• Repeat-ability -- you know there are more lots.  You'll have a floorplan that you've tested.  Repeating that with minor variations is simple compared to finding an existing home and renovating that with the same consistency in many markets.

Cons to this plan:

• Contractors and builders are NOT the same.  Many, MANY contractors who have been in the business for a long time have NO idea how to get a lot from Lot to Frame.  They may think they know but unless they've done it a few times please do not assume that years = experience in new construction.
• The cost of materials for a build is the highest it has been in a very long time.  In this particular moment it would cost more to build the same house than it did 9 months ago (and we have no idea what 9 months from now will look like).  Perhaps the city would grant a time-variance in light of COVID?