Building a brand new rental property instead of acquiring and rehabilitating an existing home can provide higher profits. It’s not always a hands-down decision when evaluating an existing home vs. new construction as there are too many factors that have to be considered. It’s never one over theexisting or new other in all cases. What are some of these factors you need to consider before deciding whether or not to build or buy?

It first depends on what your intentions are with the property. If it’s a fix and flip proposition it may be more likely that a successful flip will involve a distressed property in an established neighborhood. The math needs to work out where the final sales price is easily determined along with how much it will take for the renovations. If you decide to look for a flip in the suburbs where the homes are relatively new the only thing you might find is a property that is near foreclosure and not a home that needs significant repairs in order to make value. It’s certainly possible but finding bargains in a relatively new development may not turn much of a profit compared to finding a true diamond-in-the-rough.

If you’re going to hold onto the property, you might care less about the acquisition and future value estimations if you’re going to rely on rental income and long term appreciation. In this scenario, it’s a matter of market rent and holding time.

Older neighborhoods vs. new developments or building brand new compared to existing properties may have the same generalities but the true test comes from your intentions. If you’re actively searching in an established area, you might find more bargains if you can justify the repairs. Further out however home values should be in a relatively tight range with fewer opportunities for a profitable flip. Not always, just remember the generalities.