Seeking Advice on NEW Construction

[Miguel Suarez]

My dad currently has over 1 acre of land that he purchased 3 years ago. He had new construction to build a house onto the property. There is still so much land and my dad and I have been talking if it would be a good idea for me to invest on building another house on the opposite side of the current property because it leads to a main street. My question is for anyone that would like to give their input or advice or experience if it would be a good investment for me to build new construction, I was thinking of doing a 2 bedroom and 2 bathroom. I was thinking of it becoming a rental property.

Also, if anyone has experience on building new construction on what is needed, experience on pros and cons, headaches within the process, what to watch out for. etc.

Thanks,
Miguel Suarez

[Lauren Robins]

Hi Miguel!

It’s great that you’re thinking about leveraging your dad’s land for a rental property, especially since new construction gives you the ability to create something purpose-built for tenants. Since the property already has an existing home and access to a main street, you may be sitting on a real opportunity—but there are a few critical steps and considerations to take into account before moving forward.

The first step is determining feasibility. Just because there's land available doesn't automatically mean you can build on it. You'll want to check with your local planning or zoning department to confirm whether a second home can legally be built on the lot. Depending on how the property is zoned, you may need a variance, rezoning, or to formally subdivide the lot to make it legal for another dwelling. The city or county will also have rules about setbacks, utility easements, and how close you can build to property lines. Additionally, find out whether the existing utilities—water, sewer, electric—can be extended to a second structure, or whether you'll be required to install new, separate lines. In some places, the answer may be "no" unless you're building an accessory dwelling unit (ADU), duplex, or following other specific regulations.

If you can build, your idea for a 2-bedroom, 2-bath home is a strong one. That size is highly attractive to a wide range of renters, from working professionals to small families. The next step would be to analyze whether it’s a good investment. You’ll want to research rental rates for similar 2/2 homes in the area and compare that to the total cost of building—this includes everything from permitting and utility connections to labor, materials, and inspections. You can then estimate your potential return using a rental property calculator. Be sure to include all ongoing costs like property taxes, insurance, and potential property management if you don’t plan to manage it yourself. If you're financing any part of the construction, the loan terms will also affect your bottom line.

New construction has its pros and cons. On the positive side, everything is brand-new, meaning lower maintenance costs in the early years and potentially higher rents due to modern finishes and energy-efficient systems. You also have the chance to build specifically with renters in mind, choosing finishes and layouts that are both durable and appealing. On the downside, construction almost always comes with surprises. Permitting delays, rising material costs, and contractor issues are all common. Utility connections—especially sewer and water—can be expensive and slow-moving, and failing inspections during the build can lead to costly delays. Many experienced investors recommend budgeting an additional 10% to 20% for unexpected costs and getting multiple quotes for each major part of the job to keep contractors honest and competitive.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.