It can be a sometimes tricky proposition deciding between an existing property that needs remodeling or building your own investment property from the ground up. Each has its own share of costs and considerations and both have its own advantages. Let’s take a general evaluation of each prospectnew or existing and look at some key points that need to be addressed.

 With existing properties that need work, you need to determine if it’s a remodel that you’re looking at with casual upgrades to the kitchen, bath and countertops for instance. Or is it a bit more than just new appliances? Is it a major rehabilitation? At its most basic, you’re just calculating the expenses and determining whether or not you will make enough money as the property is sold. Yet depending upon the age of the house, how are the “bones?” If the property needs a major rehabilitation are there other areas that may be structurally weak simply based upon how old the structure is? It could sometimes be there are too many holes in the dyke and not enough fingers to plug the leaks.

Now consider a new property. A newly constructed home to be rented or flipped won’t have any age or depreciation issues. It’s a brand new build. And if the brand new build is settled in an existing neighborhood you’ll command a higher price for the flip compared to building in or near another new subdivision. On the other side of the coin is the cost to construct. More than just a major remodel or rehab, you’re building a structure with all new parts, permits and labor. Yet again, it’s still a situation of determining whether or not you can make a profit once all costs are considered.

For real estate investors, building a brand new rental property is a relatively new model. In the past, it was typically the distressed home or one that was in foreclosure and needed repairs that fit the investor’s business plan. Today, consider building new and do the math. If you don’t, you might be leaving money on the table.