Posted by Brenda Troy on September 21, 2004 at 18:59:31:
My husband and I are considering building a new duplex and then renting the rooms out. We will be doing the work ourselves, and will be working under a licensed contractor. Has anyone else done something similar? Does this sound like a good investment? We are new to real estate investing and would appreciate any information and advice you have to offer. Thank you!
I am building to hold for rental right now. SF 3/2 in a vacation town in the southern Appalacians. Part of the decision was based on having built several houses well under appraised value. Also this small town does not have many houses to rehab. If I lived in a larger town I would only do rehabs. Be cautious about cost over runs. Construction is expensive right now, material prices are high and many subs are getting top dollar due to a building boom. So many things can go wrong during construction to drive up the cost and add to the time required to finish. It is hard to plan for all of the headaches involved in construction and the back breaking work. If I didn’t think it was worth it I would not have jumped in but I am told there are easier ways to make money at REI.
My first RE project was building and then renting out 3 duplex’s. Construction went pretty smoothly, actually came in ahead of schedule and under budget by about 5%. However I misjudged the rent they would get by abut 15%, and to compound that because I was asking too much I had 6 units sit empty for 2 months, eventually tunred it over to a realtor, dropped the price, and they all leased in 2 weeks. This was two years ago, right now the cashflow is about break even (still in a slow market), but the depreciation realizes some significant tax savings for me.
And of course, you havenegative cashflow while you are dealing with the construction loans, taxes etc while building.