Flipping vs. building new

[Eric James]

For those who flip houses....or build new ones. Why do you choose one strategy over the other? What advantages and disadvantages do you see with each?

[Ritch Bonisa]

In this discussion I think it is important to point out a few things.

• New construction brings fewer surprises vs a large flip.  Risk factors are more controllable. Costs are more of a fixed item. 

• Sometimes new builds can be completed faster than a large flip, just depends.  New builds can be done (and with high quality) in as little as 4 months. 

• Many times on a flip investors buy wholesale and have to use cash or hard money.  New builds can get new construction loans.  Those rates are lower than hard money. 

I'm not putting in an argument for one strategy over the other.  We do both. I would not attempt to do a new build in an unproven area.  It works best to find a vacant lot in a gentrified neighborhood.  Works even better when you can do 2 or more flips in the same general vicinity along with 2 or 3 new builds.  You impact your own comps and also have the ability to be very efficient on the construction side. 

Many investors are afraid to do new builds, but it can work very well in the right neighborhood.