Build New or Buy Existing?

[Landon Jones]

Let me start out by saying I’m very early in my real estate journey. I am still researching and taking in as much information as possible on all the different strategies out there...so it goes without saying that I haven’t executed a deal yet.

I am leaning towards starting with a duplex, triplex, or quad.

My question is, what are some pros and cons of building new vs. buying existing properties?

I should state that I am a commercial general contractor by trade, so the construction process is no issue for me. One thing that leads me to this question is the risk of the unknown with buying existing properties, as I am very familiar with renovation work and the surprises that can come with it. With a new building, you know exactly what you are getting.

What are some of the financing hurdles, rental rate variances, exit strategies, etc that may come with each property type?

Could there be more long or short term return in a value-add situation vs. starting new?

[Jay Hinrichs]

this is highly regional.. there are still large parts of the US were existing stock can be purchased and remodeled for far less than cost to build new.. especially with material costs right now..  OSB we bought last week for 38 a sheet popped us to 44 a sheet this week..  my lumber packs are more than double what i spent 18 months ago.. 20 to 25k to 50 to 60k same house.
roofing is going up .. every thing is going up up up.. so unless rents really start rising your going to see a big squeeze in the rental / build arena in my mind.

for retail owner occ we are able to pass it on and keep our margins.. its really easy when buy says Hey I saw your 2000k sq ft home 2 months ago for 575k  how come its 610k today..  Easy lumber sky rocketed and given the market buyers are paying it if they want a new house in a great location with great schools.  So 300 a foot to 600 a foot is the new norm.