Real estate investors may sometimes find that a property is in too poor a condition to do any sort of major rehab. In this instance, it is either best to walk from the deal or explore a complete tear-down and build from the ground up. And depending upon the location of the home, tearing down andinvesting in real estate building brand new might provide a better return. What does the location have to do with a potential profit?

In areas where there has been steady, extended growth, interior real estate is harder to come by. As property values increase, fewer buyers are able to qualify for financing. That’s why you can find older, more established neighborhoods near a major metropolitan area that sell for several hundred dollars per square foot. It’s not necessarily that the homes by themselves are that much more desirable but the location of the property. You can clearly see that consideration when you get quotes to build two brand new 4,000 square foot single family homes. The cost of materials and labor will be similar but the location and the lot can command a different price based upon its location.

That said, there are places where you can find neighborhoods that can command a higher price based upon the zip code and finding just the right property that would be worth more brand new compared to buying an existing home, distressed or otherwise. In Houston, Texas for example where the real estate bust had little effect while at the time the oil and gas industry and contributed greatly to the area’s economy over the years. Jobs are plentiful, median home prices are reasonable and people are moving to the area. More people mean more homes that are needed and real estate values naturally rise. If you’re a real estate investor who is considering building a new rental or flip instead of buying an existing property, don’t discount the notion of buying in an established neighborhood and building from the ground up.