Building a new property instead of buying one?

Buying & Selling Real Estate
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Building a new property instead of buying one?

Tyler D.
Member since 2019 · 219 posts · 99 votes

The town I live in has gotten quite expensive, with the average home price around $350k, and rents at around 1200. However, land is fairly cheap, and I found a pair of half-acre plots for 50k each. I'm thinking about building something on them and either holding or selling and wanted to see if anyone here can share their experience and insight.

The land is in a primo area, and the houses directly next to the plots are 600k and 750k respectively. I got a rough estimate from a home builder website and it was around 200k before electrical, plumbing, etc. for stick built. Modular is obviously cheaper. I could build a duplex or fourplex, which may be a smart idea cashflow-wise, but might hurt the resale value. Also the land is on a slope, but I imagine that wouldn't be too hard to level out and build the home(s) on.

Overall, does this sound like a smart situation to take advantage of? Would you build single family or multi? And would you buy (build) and hold or flip? Let me know your thoughts.

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  • Stone Saathoff
    Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
    6y

    I would build multi all day.. are you planning on holding onto it for a long time?

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  • Tyler D.
    OP
    Member since 2019 · 219 posts · 99 votes
    6y
    Originally posted by @Stone Saathoff:

    I would build multi all day.. are you planning on holding onto it for a long time?

    Depends. I'm primarily a buy and hold investor. That being said, if I could get a clearly better return by selling it and investing elsewhere I'd be open to it.

    It seems like an obvious choice to build something there, as building would be considerably cheaper than buying, especially in that neighborhood. And I'd get a solid cashflow or resale value there. Just want to be sure that there isn't something I'm missing.

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  • John Collins
    Investor · Tx, GA · Member since 2019 · 313 posts · 337 votes
    6y
    Originally posted by @Tyler D.:

    The town I live in has gotten quite expensive, with the average home price around $350k, and rents at around 1200. However, land is fairly cheap, and I found a pair of half-acre plots for 50k each. I'm thinking about building something on them and either holding or selling and wanted to see if anyone here can share their experience and insight.

    The land is in a primo area, and the houses directly next to the plots are 600k and 750k respectively. I got a rough estimate from a home builder website and it was around 200k before electrical, plumbing, etc. for stick built. Modular is obviously cheaper. I could build a duplex or fourplex, which may be a smart idea cashflow-wise, but might hurt the resale value. Also the land is on a slope, but I imagine that wouldn't be too hard to level out and build the home(s) on.

    Overall, does this sound like a smart situation to take advantage of? Would you build single family or multi? And would you buy (build) and hold or flip? Let me know your thoughts.

     Yeah, a 50k lot with houses like that around is incredible value. Normally if the surrounding hosues are 650,700k, the lot itself will start out at 300-400k and won't go below 200k minimum. Slope and grading is always something that can be sorted out before foundation is laid, but find out more about the neighborhood as a whole, what the income demographics are and vacancy rates. Alot of areas with nicer houses will not be rental areas. 

    You'll make a tidy 100-150k profit on a flip instead of rental, but you'll lose out on time. The time to build and the time to sell. So as is usually the case, know your situation and see if it's worth it (might go 2 years with no incoming cash). 

    0Reply
  • Tyler D.
    OP
    Member since 2019 · 219 posts · 99 votes
    6y
    Originally posted by @John Collins:
    Originally posted by @Tyler D.:

    The town I live in has gotten quite expensive, with the average home price around $350k, and rents at around 1200. However, land is fairly cheap, and I found a pair of half-acre plots for 50k each. I'm thinking about building something on them and either holding or selling and wanted to see if anyone here can share their experience and insight.

    The land is in a primo area, and the houses directly next to the plots are 600k and 750k respectively. I got a rough estimate from a home builder website and it was around 200k before electrical, plumbing, etc. for stick built. Modular is obviously cheaper. I could build a duplex or fourplex, which may be a smart idea cashflow-wise, but might hurt the resale value. Also the land is on a slope, but I imagine that wouldn't be too hard to level out and build the home(s) on.

    Overall, does this sound like a smart situation to take advantage of? Would you build single family or multi? And would you buy (build) and hold or flip? Let me know your thoughts.

     Yeah, a 50k lot with houses like that around is incredible value. Normally if the surrounding hosues are 650,700k, the lot itself will start out at 300-400k and won't go below 200k minimum. Slope and grading is always something that can be sorted out before foundation is laid, but find out more about the neighborhood as a whole, what the income demographics are and vacancy rates. Alot of areas with nicer houses will not be rental areas. 

    You'll make a tidy 100-150k profit on a flip instead of rental, but you'll lose out on time. The time to build and the time to sell. So as is usually the case, know your situation and see if it's worth it (might go 2 years with no incoming cash). 

    It does seem like an amazing value. I was wondering why they were on the market for so cheap. To be fair, the two houses on either side of the lots are HUGE 3k+ sqft houses, but even the 2k sqft houses on the same street are in the 400k range. I'm not too worried about the time, as I have a fairly big chunk of cash sitting around that I've been wanting to invest in something. If I can turn a good profit on this it would be a good place to put it.

    I'm still debating on whether a duplex or SFH would be the right idea. I could obviously get more cashflow with a duplex, but as you said this might not be the right neighborhood for that, and maybe a build and flip (with a SFH) is the smarter way to go.

    0Reply
  • John Collins
    Investor · Tx, GA · Member since 2019 · 313 posts · 337 votes
    6y
    Originally posted by @Tyler D.:
    Originally posted by @John Collins:
    Originally posted by @Tyler D.:

    The town I live in has gotten quite expensive, with the average home price around $350k, and rents at around 1200. However, land is fairly cheap, and I found a pair of half-acre plots for 50k each. I'm thinking about building something on them and either holding or selling and wanted to see if anyone here can share their experience and insight.

    The land is in a primo area, and the houses directly next to the plots are 600k and 750k respectively. I got a rough estimate from a home builder website and it was around 200k before electrical, plumbing, etc. for stick built. Modular is obviously cheaper. I could build a duplex or fourplex, which may be a smart idea cashflow-wise, but might hurt the resale value. Also the land is on a slope, but I imagine that wouldn't be too hard to level out and build the home(s) on.

    Overall, does this sound like a smart situation to take advantage of? Would you build single family or multi? And would you buy (build) and hold or flip? Let me know your thoughts.

     Yeah, a 50k lot with houses like that around is incredible value. Normally if the surrounding hosues are 650,700k, the lot itself will start out at 300-400k and won't go below 200k minimum. Slope and grading is always something that can be sorted out before foundation is laid, but find out more about the neighborhood as a whole, what the income demographics are and vacancy rates. Alot of areas with nicer houses will not be rental areas. 

    You'll make a tidy 100-150k profit on a flip instead of rental, but you'll lose out on time. The time to build and the time to sell. So as is usually the case, know your situation and see if it's worth it (might go 2 years with no incoming cash). 

    It does seem like an amazing value. I was wondering why they were on the market for so cheap. To be fair, the two houses on either side of the lots are HUGE 3k+ sqft houses, but even the 2k sqft houses on the same street are in the 400k range. I'm not too worried about the time, as I have a fairly big chunk of cash sitting around that I've been wanting to invest in something. If I can turn a good profit on this it would be a good place to put it.

    I'm still debating on whether a duplex or SFH would be the right idea. I could obviously get more cashflow with a duplex, but as you said this might not be the right neighborhood for that, and maybe a build and flip (with a SFH) is the smarter way to go.

    Check with the HOA as well - in Texas , where alot of older neighborhoods are gentrifying and turning into complete remodels / new builds where homes are in the 600-1.1 mil price range, a duplex wouldn't be allowed. The street has to be uniform in terms of single family homes.

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  • Stone Saathoff
    Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
    6y

    I would definitely check the HOA to see if multi is allowed but either way, having a new build with that type of surrounding value, you're looking at great cashflow for your rental, and a sky high resale value down the road. Plus perfect condition from the start, likely no repairs for a while.

    0Reply
  • Tyler D.
    OP
    Member since 2019 · 219 posts · 99 votes
    6y
    Originally posted by @John Collins:
    Originally posted by @Tyler D.:
    Originally posted by @John Collins:
    Originally posted by @Tyler D.:

    The town I live in has gotten quite expensive, with the average home price around $350k, and rents at around 1200. However, land is fairly cheap, and I found a pair of half-acre plots for 50k each. I'm thinking about building something on them and either holding or selling and wanted to see if anyone here can share their experience and insight.

    The land is in a primo area, and the houses directly next to the plots are 600k and 750k respectively. I got a rough estimate from a home builder website and it was around 200k before electrical, plumbing, etc. for stick built. Modular is obviously cheaper. I could build a duplex or fourplex, which may be a smart idea cashflow-wise, but might hurt the resale value. Also the land is on a slope, but I imagine that wouldn't be too hard to level out and build the home(s) on.

    Overall, does this sound like a smart situation to take advantage of? Would you build single family or multi? And would you buy (build) and hold or flip? Let me know your thoughts.

     Yeah, a 50k lot with houses like that around is incredible value. Normally if the surrounding hosues are 650,700k, the lot itself will start out at 300-400k and won't go below 200k minimum. Slope and grading is always something that can be sorted out before foundation is laid, but find out more about the neighborhood as a whole, what the income demographics are and vacancy rates. Alot of areas with nicer houses will not be rental areas. 

    You'll make a tidy 100-150k profit on a flip instead of rental, but you'll lose out on time. The time to build and the time to sell. So as is usually the case, know your situation and see if it's worth it (might go 2 years with no incoming cash). 

    It does seem like an amazing value. I was wondering why they were on the market for so cheap. To be fair, the two houses on either side of the lots are HUGE 3k+ sqft houses, but even the 2k sqft houses on the same street are in the 400k range. I'm not too worried about the time, as I have a fairly big chunk of cash sitting around that I've been wanting to invest in something. If I can turn a good profit on this it would be a good place to put it.

    I'm still debating on whether a duplex or SFH would be the right idea. I could obviously get more cashflow with a duplex, but as you said this might not be the right neighborhood for that, and maybe a build and flip (with a SFH) is the smarter way to go.

    Check with the HOA as well - in Texas , where alot of older neighborhoods are gentrifying and turning into complete remodels / new builds where homes are in the 600-1.1 mil price range, a duplex wouldn't be allowed. The street has to be uniform in terms of single family homes.

    Thanks, I will check that out. 

    0Reply
  • Tyler D.
    OP
    Member since 2019 · 219 posts · 99 votes
    6y
    Originally posted by @Stone Saathoff:

    I would definitely check the HOA to see if multi is allowed but either way, having a new build with that type of surrounding value, you're looking at great cashflow for your rental, and a sky high resale value down the road. Plus perfect condition from the start, likely no repairs for a while.

    Appreciate the info. Do you think it would be smarter to go with a 2/4Plex (if possible) or do a straight single family home? I drove the streets nearby and it is mostly SFH with a handful of multifamily.

    Playing devils advocate here, my thoughts are that with a 2/4plex in a top neighborhood like this, it may be hard to find an exit strategy. The rents may not be enough for an investor to buy, and a homeowner wants their own huge home, not a 2/4plex. Where with a SFH there is obviously a market for that.

    But I might just be overthinking it. I could likely just hold the MFH and get good cashflow from it.

    0Reply
  • Stone Saathoff
    Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
    6y

    Which area are you in? Here in San Antonio, Texas duplexes are hard to find and people are willing to pay a premium for them. That would be the best of both worlds if you were here. For top cashflow the more units on that same property the better so 4-plex is a great choice too. Depends on your area.

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