New construction or not?

Question

I am completely new to real estate investing and I am looking to purchase or build my first property. I’m wondering if anyone has ran any analytics on New construction four Plex in Utah like build cost etc. and would be better to build or buy an existing building? Thanks so much!

George Mastrosavas · Answer

Who doesn’t love getting something brand-new—especially if it’s custom-made just for you? The problem is, custom-made things tend to come with higher price tags and longer delivery times—which are important factors in deciding whether you should buy or build a house. heres some data:

In 2020, the average cost to build a house was over $485,000. Meanwhile, the average cost to buy an existing single-family home was nearly $309,000.That means choosing to buy a pre-existing house instead of building a new one could save you $177,000!

And if you took the middle road and bought a new, semi-custom tract house, it’ll still cost you about $50,000 more than a previously owned home

A house is way too big of a financial responsibility to make a wrong choice here. To help you land the best decision for you and your budget.If you’re a first time home buyer investor it’s probably better to go the cheaper route and buy an existing house to get in some investor homeownership reps and build equity (your home’s value minus how much you owe on it) before you take on the challenge of building a new house.

But if you’re confident you can build a house while staying within that 25% limit and still handle all the other homeownership costs like maintenance and utilities, then building a house could be a fun adventure for you.

Whether you buy or build, owning a house you can afford is an incredible way to build wealth!

Rick Albert · Answer

You also need to factor in your opportunity costs. If you build and it takes six months, that's six months of no income and you still have carrying costs. Buy an already built 4-plex and you start collecting rent day one (or whenever the renovations are finished).

Bruce Woodruff · Answer

Bad time to new-build right now.....material costs, supply chain issues. most contractors can't even commit to a firm price or schedule. Way too flaky out there. Just find something you like and buy it....IMO

Alora Glaze · Answer

If you're just starting out and wanting to get into multi-family, then I would suggest looking and 'driving for dollars' to find one. A pre-existing structure will mitigate a lot of the issues Becca, above, mentions - particularly with zoning and permit which can get expensive and be a lengthy time-process (time is money).You'll need to find a boots-on-the-ground or a contractor that can handle multiple units - you may be able to find this resource through vetting a property management company or by joining social media groups for investors in that area.Always work with licenses, insured, and referred folks - from the contractor to the realtor to the PM etc.Best of luck to you!!

Becca Summers · Answer

The hardest part about building a fourplex right now is finding a property with appropriate zoning for sale. Most of the fourplex new construction was developed and got zoning approved to make it happen. Construction costs and land costs are pretty prohibitive.