Comparing a New Build Duplex to Conventional rehab/rental

[Andrew Laurence]

I'm tired of getting robbed by inflation! I have a big chunk of cash saved that I need to put to use, but I'm having trouble determining the value of a new build vs a more traditional deal just buying a rental and rehabbing.

I've been presented with an opportunity from a builder to build a new duplex in an area which can be used as short-term or long-term rentals in Knoxville, TN.

The builder is a rare combination of fast, cheap, AND quality, and has written a "cost-not-to-exceed" clause into the building, so it's an extremely competitive build cost (details below).

The deal would cash flow very nicely, but it would force me to leave a chunk of cash into the property.

Here are the numbers:

duplex: each unit 2:2, 900 sq ft

Total cost of land, 1.2 acres (This is already leveled, excavated, and prepped for building): $80k

Maximum build cost: $252k

Total cost: $332k

Cash in: $67,000

ARV: $350k

Approx cash flow: $800-1,100

So, again, how does this compare to a typical buy/rehab? One thing to keep in mind is that I'm a Physician Assistant student and work and do not have the time or desire to manage a rehab right now.