Rental properties, build new or flip old?

[William Gunther]

Hi! I’m a contractor in the Midwest, and trying to decide between building new homes for rental properties, or rehabbing old. Currently I have been building some entry level spec homes, 2-3 bed, 2 bath around 1200 sq ft. I have also acquired a couple flip projects. I have found the new builds to be considerably less labor intensive, but obviously much more expense for material. To compare, a new build would put me in around $130k and a flip of comparable size, $90k. With interest rates where they are now, the $40k will eat up a lot of cash flow but I will certainly have more equity in new construction. Any thoughts on this?