To build or to rehab?

Question

I hope this isn’t a dumb question. Do you think building and then renting a structure, either single or multi door, could be just as much or more of a lucrative venture? It would pan out this way.

Build - either my self or sub contract the work. My father is a GC so I have access to the experience of doing it right.

Rent - rents could command a higher premium because the unit is brand new

Refinance - like usual

Repeat -

The reason why I ask this question is because to me, if I build on a lot then I have complete control over whether I make it a single door or more.

Ultimately I am asking these questions because my wife and I have started making decisions to getting our first rental by the end of the year. This alternative to the traditional brrrr method crossed my mind. I know this just comes off as real estate developing but, it almost seems like a principle of build to rent.

Hope this makes sense.

Love Y’all

Jonathan Reed

Jonathan Reed · Answer

@Brandon P. Excellent input sir. I appreciate it greatly.

Brandon P. · Answer

Building new requires more capital, time and planning up front whereas a rehabs are typically shorter and cost less money out of the pocket.Have a look at what new properties rent for in your area vs low properties.

Create realistic projections to see how much the revenue and expenses would be with the new properties vs old ones & see how this would change if you scaled up from 2-10 properties. Also, project estimated asset values as the newer properties will be worth more when you sell them in the future.

Educate yourself about the local building/zoning bylaws because if you can only build multiple units if the lot is zoned for it.

You don't have to pick one or the other either, you can try both and see which one works best for you.