Why Aren’t More Investors Building Instead of Buying?

Question

Most real estate investors fight over the same overpriced, outdated properties—when they could be building for less and making more.

I’ve been in development for years, and I can tell you firsthand: new construction is one of the most overlooked ways to generate six-figure profits.

Here’s why:Build for WAY less than market valueSkip bidding wars and competitionRent or sell brand-new properties at top dollar

Yet, most investors avoid new builds because they think it’s too expensive, complicated, or risky. But is that really true?

I want to hear from you: Have you considered building instead of buying? What’s stopping you? Let’s break it down—drop your thoughts below! 👇

Jeremy England · Answer

Equity partners, from a builder perspective how would you structure that.  in short, I only have so much cash.  I can build one and sell 1.  What if i want to build 5?

Ryan Arth · Answer

We made the leap to building, and stood up the construction company to self perform our builds along the way (along with GCing for others). Currently working on multiple asset types at once, which is drinking from a firehose, but it is better to capitalize on opportunities than to be comfortable.

For context, these are examples of what we are working on:

Spec homes in a new development, to attract other build clients for the vacant lots. (outlying suburban)

Build to rent duplexes ~74 doors on one site (outlying suburban)

Garden Apartments or townhomes on .38 acres ( urban adjacent infill, key location)

Melissa Haworth · Answer

Hi Robert,Love this conversation—thank you for starting it. As a Florida real estate agent and short-term rental investor who works almost exclusively with out-of-state buyers, I’m seeing more and more clients open to new construction as a strategy, especially in high-demand vacation markets like the Panhandle.

You're absolutely right—most investors are still circling the same outdated listings, throwing offers at properties that need full gut jobs and sell above asking. Meanwhile, some of the savviest clients I work with are quietly building modern, rental-optimized properties for less than market value—and cash-flowing faster because of it.

That said, here’s what tends to hold people back:

• Perceived complexity – Out-of-state investors often don’t know where to begin when it comes to vetting builders or navigating permitting in a different county.
• Timeline fears – Many assume building will take too long to generate income, especially compared to a turnkey.
• STR-specific uncertainty – They’re unsure how to balance design decisions with what actually performs in a short-term rental, especially in coastal, regulated markets.

But once we break it down and pair them with the right team—builder, agent, PM—it’s a completely different story. They get a purpose-built rental with premium finishes, stronger bookings, and fewer maintenance surprises down the line.

So yes, I’m a big believer in building—but only when it’s done with a clear understanding of the local STR market and guest expectations. That’s where the real ROI lives.

Mike H. · Answer

I've been investing for 15 years and I've seen both sides of it.  I agree with you 100% though that right now new construction is one of the few ways to consistently invest and be able to do it as a BRRR method so you can rinse and repeat and continue to grow without eating through your capital.I was buying rehab to rent deals here in illinois for about 15 years (about a year or two after the 08 crash).  I was able to be all in at 70% or better on almost every one of my deals and had built up a portfolio of 83 sfh's worth between 160 to 200k before covid.  After covid hit i sold about half the houses and the rest are now worth between 160k to 300k. But since just before covid, the deals stopped.  Just completely dried up. I looked at new construction here but the numbers by me just didn't make sense.  A 3bed, 1,500 sq ft home was selling for about 260k to 280k but the build costs plus the lots (assuming I gc'd the thing myself) were running about 220k to 230k.    By the time you added financing/loan costs and realtor fees, the numbers just didn't make sense. However about 3 or so years ago I ran into eastern tennessee and tried a couple of builders that were building somewhat wholesale.  It was a bit of a struggle to manage but the numbers came out ok.  Two years ago, I was able to get my ex brother in law to move out there and now i can build for cost on my holds (some we build to hold and we hold separately and some we build to sell and we split the profits of the ones we sell).But for the ones we build, I can be all in at 70% LTV or better and they'll cash flow as STRs (gatlinburg/sevierville are heavy str areas) right from the get go.  So in some sense, its literally like printing money.  Its still not easy.  But I haven't been able to find anything else right now thats coming even remotely close to what I'm able to do right now.I'm sure there are other areas and product types doing as well if not better.  But I can't find them. And i've tried a bunch - was flipping land nationally until a year ago when that model really dried up; and even did some mobile home rehabs in florida where I did ok but then desantis got stupid with immigration and literally ALL the contractors left the state - the ones there illegally had to move but they were living with other family members so all of them moved together and there was noone left to do any work down there.

Robert Ellis · Answer

did you ever look at infill in your market? infill in our market sells for $275-$400 per square foot and I'm sure you'd see similar trends if you are in a big metro. build costs are $190 a square with our profit and we only build in 4 zip codes in Columbus Ohio for that exact reason so we place capital in the best areas and it's mainly the areas where those have historically received the build exits we are talking about. it's really only in the last 4 years the numbers have gotten there.

Susan Swanson · Answer

I agree with you.  New construction is the new wave that not all BRRRR investors are "coded" to consider.  The speed bumps that investors should avoid in new construction are: paying cash for a lot, closing on that lot, finding a trustworthy builder, getting a hard $ loan at high % rates & closing again, then closing a 3rd time when property is finished.  That's 3 closing costs!  Plus, let's say it takes 8 to 15 months to complete a build.  That's a wide-open window that can let a lot of bugs in.  Wouldn't investors interested in new construction, less hassle & less capital expenditure builds wish to purchase a nearly completed or completed production build with 25% down with builder incentives, pre-negotiated for investors & turnkey with PM in place via Build 2 Rent? It's a regular close window of 30 days for lender CTC, doing an inspection and letting Title do their thing and it closes once, not 3 times.  It's called investing smarter not harder & a lot quicker.

Scott E. · Answer

Out here when I live it's going to cost at least $275/SF to build a spec that will keep up with the competition and meet buyers expectations (high ceilings, semi-custom cabinet package, fireplace, floor to ceiling tile in all showers, swimming pool, temperature controlled garage, pot filler, thermador appliances, level 5 drywall, oversized custom pivot door for entry, epoxy in garage, custom closet in master, etc)

Also that number assumes you are owner-builder or you GC the job yourself. Hire a builder and now your cost is $350/SF for the same product.

7,000 SF lots in these neighborhoods run anywhere from $600k-$800k meaning you're all into the deal for ~$1.7M not including holding costs, staging, commissions on resale, etc.

This all means you need to build in a neighborhood that can support a minimum of $650/SF resale.

It's possible but it is extremely competitive, and extremely risky. Also capital-intensive. Can you generate six-figure profits as you've suggested? Totally. But it's not easy and not for the faint of heart.

Robert Ellis · Answer

great points