Should I build? or Buy?

Question

Hello everyone, I have been stuck trying to figure out which route to start my real estate investing. My fiance and I currently live in my parents basement so we have little expenses. We are getting married august 15th 2020 and my parents are gifting me 2.5 acres in Howell Michigan. I have been drawing blueprints for our house that we will be building, we will only be subcontracting a few things out like the foundation and septic field. We will be doing everything else our self's. My plan is to fund the build with greenstone's D.I.Y loan then after the build get it appraised and do a Cash-out refinance so we have some money to buy a Duplex or single family house.

or..

Hang onto the land and purchase a duplex live in one side rent the other..

Thank you!

or..

Hang onto the land and purchase a duplex live in one side rent the other..

Thank you!

Jaysen Medhurst · Answer

@Rhett Stephen Lowe, finding off-market opportunities is possible. You need start by narrowing down what areas you're interested in and what your criteria are. Then start compiling a list. You can pay a list service or do the legwork of searching through property records. Pare down that list as much as possible and then start sending letter and trying to make contact with owners.

Rhett Stephen Lowe · Answer

@Jaysen Medhurst Thank you for your reply and the helpful insight. I got pre-approved for a loan and am looking for a house to buy in Michigan. I have looked in my area for a MFR on all of the major real estate websites like Realtor, Zillow, etc.. and have not found anything, How would you go about finding a deal when there is not much on the MLS.

There are a few single family houses that have caught my attention, Maybe a possible Live in Flip

Jaysen Medhurst · Answer

Hi, @Rhett Stephen Lowe. Good on you for getting started so early in life. Personally, I would not dive into a new construction build at this point in your life. This is not an easy process. From a financial perspective, it's highly unlikely that you'd be able to build for less than you can buy. Even less likely that you will be able to do a cash out refi. More over, you're young and don't really know what you want in a house. Save the custom build until you're older and have lived in a few places.

Look for a MFR (I think 3- or 4-unit properties are way better than duplexes), live there a few years, and then turn it into a pure investment property. Do this a few times as you settle into married life, build a nice foundation for you and your family.

Last thing to note, if the FMV of that 2.5 acres is more than $60k, you'll have some tax liability. Make sure you talk to a good CPA before anything formally happens.