Build or buy first property

[Leonard Leon]

Hey everyone, so I live in Massachusetts and it's a very expensive market to get first started. I'm looking to house hack a duplex with garage but everyone i see is in a terrible area. I'm thinking about buying a piece of land and building exactly what I'm looking for. Just wondering if anyone has used this strategy, and if it's a good idea right now especially with materials out of control price wise. Any advice would be greatly appreciated!!

[Jonathan Bombaci]

Hi @Leonard Leon you're right of course. The MA multi-family market is a very difficult one right now. We almost only do multi=families and it's tough to find clients what they're looking for without ending up in a bidding war. That being said the benefit of househacking is that you can buy a duplex through FHA at 3.5% down or conventionally through a credit union at 5%-10% down, if you try to build one yourself the out of pocket is going to be much higher.

I'll be honest I've never done new construction before but we have explored it on a few project a few times. Typically acquiring the land is the first step and finding something that is permitted for a multi-family is not an easy task. If you get some land that is considered shovel ready you'll pay a bit of a premium for it, otherwise if its raw land you'll need to spend capital to get it shovel ready and permitted. The few times we've looked into building new construction typically the bank is looking to lend 65 - 70% of the funds to build the property, which means you're looking at 30-35% down and sometimes they wanted us to acquire the land and get it permitted before they would finance the new construction. 

We were exploring doing a modular build which could be a good middle ground. You'll still need to find and acquire the land but most modular companies will provide financing with 10-20% down until the house is delivered, then you just refinance it with a traditional bank at conventional rates and it should be "move in ready" 30-60 days after the modular is dropped on the foundation. You'll still need to do the siding, flooring, counters, and connect all the utilities but its alot faster than going with a stick build new construction. 

 I've bought and sold 100's of properties and have never done a new construction project myself. The reason being is I find the financing harder and the project a lot more risky (timeliness, cost, permitting, market timing, etc) when looking at new construction vs something that is already built. 

I hope this helps feel free to reachout if you have any questions. 

Jon