Build New vs Buy Old

[Manco Snead]

Greetings BPers,

Looking for some opinions on building new multi-families to hold as long term rentals and possibly live in one unit. The market where I would build: medium size town with median home price at $331K, average rent for a fairly nice 2 bedroom apartment or duplex at around $1000, a severe rental housing shortage, and zero multi-families currently on the market for sale.  The plan: buy a lot and build 2 duplexes on it. I'm not GC and would be hiring out all construction work.

What criteria would you suggest considering to determine if building and holding new, following the above plan, would be a wise choice?  Without personally residing in one of the units we would want the properties to cash flow.

Thanks so much.

[Sean Walton]

Make sure the construction cost is lower than buying an existing structure it usually is but in some markets if Seattle is stealing all your good contractors because of their booming market it could be. 

Always have a good contingency. Costs usually go up rarely down. You don't want to run out of money part way. 

I'm obviously biased but having a good architect with experience is what you are doing can be an advocate with a professional duty to protect your interests especially if you don't already have a relationship with a trusted GC