All Forum Posts by: Marlon Perez

I have never found a situation where it's cheaper to build new than it is to fix up an existing property.

In my experience, most contractors are incapable of properly estimating the money or time required. You can expect to go at least 10% over budget and to take longer than anticipated.

Hi @Marlon Perez - I am in the process of building small multi family to rent and here are some thing to consider!

What is the cost to build in your market with land costs, permitting ect?? In my market we can build at 70% ARV or under and meet the 1% rule with cash flow AND have new construction which makes getting tenants and managing so much easier...we also have multiple exit strategies.

Getting a loan from a bank to finance new construction is kind of a pipe dream in this market ....not to say you wont be able to find good terms but I have not come across any for this type of plan and is a lot riskier IMO and gets very expensive....

I think it makes the most sense to consider paying cash or using a line of credit of some sorts and then maybe refinancing when the project is complete? It will be easier to get financing on the completed, rented project than to try and get financing for the construction. 

With that being said, if your strategy is DEPENDENT on refinancing or selling out ect.. it adds a layer of risk in a declining market with high rates ect...

What is your goal? Are you trying to flip or rent long term?

Hi @Marlon Perez

New construction at first glance may seem like the way to go profit margin wise.  but some things about new construction that are overlooked for first time builders that could quickly eat that up are the approval/permitting process and infrastructure issues (utilities/drainage/wetlands).  If you do decide to go the new construction route I would highly recommend to partner up with a good civil engineer that you can trust that has experience in the municipality your are building in.

If buying existing properties you may have less complications to worry about but you are likely dealing with more competition.

Have you looked at cost per sq foot to build vs cost per sq foot to buy a fixer upper plus rehab costs?

Hi @Marlon Perez, there are a few things to take into account.

1. You put the down payment down now but do not start collecting rents until the property is completed and you find tennats.

2. Lower maintenance costs. Assuming your contractors do good work, you should have minimal maintenance costs. 

3. Construction could run over budget or take longer than expected.

These are just a few considerations but there are many more. Biggest thing is hiring the right team.

Hope this helps! Let me know if I can ever be of any assistance.