Which would you choose: build or buy?

[Amy Kircher]

Which would you choose in my position??

I am looking at investing in my second rental. My rental now is great, as it’s my downstairs that has its own entrance, more than pays my mortgage plus gives me several tax advantages and write offs.

I am considering either purchasing a SFR in my college town that has a strong economy OR building a garage with an apartment on my 15 acre property. I would be using one of the two garage stalls for myself. Not sure if that is a pro or con as far as taxes, etc. (I live in northern Minnesota). I would build this a short distance away from my house but still close enough to utilize the garage stall.

So far in my research I’ve determined that the cost would be approx 80k for this garage and apartment vs around 100k or more for a so-so house in town that would rent for the same amount.

I know I wouldn’t have trouble finding a tenant for either option.

What is the best option?

[Brent Paul]

The one nice thing about building is you shouldn't have to worry about any major expenses for a while.

The downside would be you could see a big rise in your property taxes or possibly even see resistance from the city.  Some are pickier than others.  I'm not in Northern Minnesota, but it was a huge pain in the butt for my dad to get a garage built.  It took 6 months of going back and forth to meetings, revising, resubmitting paperwork.  He told me he would never do this again.  A plus would be they are close by if something happens.

SFR sounds like a good option too. My friends dad owned one near a big college and did really well with it. The nice part about that is it should be easy to sell. The downside is college kids can be reckless and irresponsible. In 10 years if you needed money for some reason and had to sell it probably would. Another Con would be it could possibly need some big repairs. Whereas the brand new one probably won't.

I have seen people do what you are doing and subdivide into another plot.