Does It Make Sense To Build With Intention To Rent?
This is a general question but does it make sense to build single family homes with the intention to rent the property? Have any of you done this or know people who have?
Thank you.
If the numbers work to your advantage and your approval with positive cash flow, I don't see why not.... It just seems like it will take a lot of up front money to build and then to rent it out - your ROI might be pretty small in the beginning...
[addsig]
Do you know what general terms are for constuction loans?
Wouldn't going through the building process help build equity faster and keep total costs of the home down resulting in higher cash flow in terms of rent over mort payment?
If your goal is cashflow, it's gonna be rare to get as good a cashflow on a new property than a "used" one. Look at the sqftage cost of new versus existing. Will you have more equity? Possibly but you shouldn't be buying existing homes at market value anyway.
[addsig]
What about building a multiple vs. buying. I have some special features I would like to see in my properties, and would almost be easier to build to my specs. I have heard of one such investor, started with land, put one 4plex on, then when full, built another, and so on. I am trying to compare this plan to buying a 10+ unit as my first property. Thanks for any advice. We (partner and I) have some money, but not a ton, approx $40k, more if really needed.
They have been putting up a 10 unit that I pass buy on a semi-regular basis, and it has been in progress for almost a year, and still does not even have the siding all on, actully no work has been done in the last couple of months. It took less time for a larger company built a 60 unit near the university.
I think you would just need to have good timelines set up with your contractor, and make sure he stick to them.
If your intent is to rent then you should look at just buying an older property.
If you want to do new construction your better deal is to sell it. I've done a couple and if you don't get to gredy on the sale price you shouldn't have a problem selling it before its done being built. What I did was took like 20% off the market value. That leaves you with a nice little profit for yourself and a . great deal for first time home buyers to by a new house with free equity.
Thats also your sales pitch.
As far as new construction loans go they tend to very. Most of them are set up so that you don't pay anything until the house it built, then when the house it done the new construction amount converts to a mortgage payment.