When does New Construction ever make sense for multifamily?

[Grant Doyle]

Many of us buy an already existing property. I am wondering how groups and individuals can afford / see the opportunity to build new? When thinking about this question I am mainly thinking of large commercial properties, but I guess the same is true to duplexes and small multifamily. Are they expecting to build, occupy, then sell? Then who would buy that new and overpriced property? I am looking for multifamily in Kansas City and have had this thought stirring in my head for a little while. 

[Greg Dickerson]

Originally posted by @Grant Doyle:

Many of us buy an already existing property. I am wondering how groups and individuals can afford / see the opportunity to build new? When thinking about this question I am mainly thinking of large commercial properties, but I guess the same is true to duplexes and small multifamily. Are they expecting to build, occupy, then sell? Then who would buy that new and overpriced property? I am looking for multifamily in Kansas City and have had this thought stirring in my head for a little while. 

I have always been a developer so it always makes sense for me. It’s what I do and where the big returns are found. New always sells and rents faster and for more. For others it generally makes sense when inventories dry up and prices for existing assets are as much or more than replacement costs. 

Development requires serious expertise and deep pockets but once you learn the business it’s vey rewarding professionally and financially.