Should You Build New Or Buy An Existing Investment Property?

Posted by Alan Zunec on Monday, January 14th, 2013 at 5:15pm.

If you are in the real estate investment game, do you prefer buying a property that’s already up or building something from scratch? Both options have their pros and cons. It helps to look at both sides of the issue, especially if you are new to the market, before you go ahead with your plans.

Building Your Own

One reason to build your own property is that you won’t find any hidden surprises down the road. Older properties, and some new ones, may have secrets behind the walls, under the floorboards or in that attic. Some can be quite expensive, like a foundation that is barely there or faulty electrical wiring. If you build your own property you can supervise what’s going up, while it’s going up.

Customization is another good reason to build a new property. Most times you won’t find all you want in a property, or something that makes your rental property more enticing than others in the same area. Rather than renovate what is already there, you can build the number and size suites that you prefer and outfit them with the amenities, fixtures and features that will bring you the biggest return on your investment.

Build your own property and you can incorporate energy efficient features from the start. Heavy duty insulation, double-pane windows, water-saving appliances and energy saving electrical and heating can help your bottom line and the environment at the same time. Health issues are also minimized in newly built properties. An older property might have hazardous materials such as lead paint, PCBs and asbestos. New homes have to follow strict codes, making sure none of these substances are present.

Buying Ready Made

If you buy a home that’s already up, you can move in much more quickly. Use the time it takes to close on the property to screen your prospective tenants. That way when the property closes you already have rental income accounted for.

Real estate prices are coming down, particularly in the urban markets. This isn’t such a great thing if you’re selling, but for investors it is the chance to get a deal on a property. You might be able to afford a larger property, thus insuring more rental income. You also have a better chance of getting a property in a more desirable location.  Another plus is that your chances of increasing your profit when you resell go up. Just hold onto it until the market prices start to increase.

Vary your investment property portfolio. In the resell market you can find apartments, bungalows, condos, townhomes and single family properties, all of which appeal to a wider range of potential tenants. This increases your chance of a positive rental cash flow.

Sometimes there is just no space to build a new property in a desirable, central location. Most metro areas have been fully developed, or nearly so. City centres are historically a desirable rental locale, so your only option may be to buy an existing property and then renovate.

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