Buying a home is a huge investment no matter what. However, when you’re buying as an investment tactic and not to actually live in the home, lots of details and decisions play into how successful your deal will be.
One of those decisions is whether to go for an existing home that can be fixed to your liking, or to start from scratch and build a beautiful, brand-new home for the market.
Luckily, you’re far from alone in wondering what the best type of investment is. It’s a question that has always been a reality of the real estate market, and has no clearly defined answer – only informed suggestions. When poring over the decision to buy or build new, there are many variable factors to consider, including:
Of course, the basic premise of real estate is to purchase a home at the proper price. Determining your price range depends on financing, as well as your timing and specific needs.
With an older home, you can score an outstanding deal, finance a few updates and renovations to up the value, and see a return on your hard work and investment fairly quickly. Conversely, building a brand new home in a fantastic location with all the bells and whistles will be expensive, and tough to justify if you don’t receive your desired asking price.
Ultimately, in a rising-price market like we are seeing currently, the ideal low-risk investment is to purchase an existing property. From fixer-uppers, to short sales, to newer homes that require little updating, there are many types of properties out there to suit different investment goals. With a bit of budgeting strategy, adequate down payments and good credit history, you’ll have an excellent range of cost-effective options to choose from.
As real estate investors, we can’t stop or speed up the clock. What we can do is plan, utilize and manage our time to the best of our abilities, always focusing on the bottom line.
Keep in mind the When purchasing an existing home, deals can be signed and renovations completed in a matter of months – even weeks. A sale can be made, or, tenants can move in faster, so your investment can start paying off right away.
However, if you’re looking at a longer, more flexible time frame, taking the time to build something new can also be lucrative. Just make sure you prepare for any hiccups that may occur in the building process, or your timeline can fall apart.
Local Rent Prices
Many real estate investors utilize properties as rentals in order to create regular income. Markets fluctuate, and having your finger on the pulse of what’s happening locally will greatly expand your ability to make good investing decisions. Follow the trends to determine how much your investment will return one year from now, three years from now, and so on. This will help you determine what the property is really worth.
Again, combining your analysis of these three factors will always lead you to an informed decision. No investment exists in a vacuum, and the smartest investors use all the information at hand to help them go with the flow!