Purchasing older rentals or building new???? - Posted by M wille

Posted by BillW. on March 15, 2001 at 06:51:23:

Here are a few questions you’ll need ansers to before you should proceed.
Do you have experience developing new rental property?
Are you able to do a market analysis of your area to determine if your anticipated project has a good chance of being fully occupied?
Do you have a lender in place to fund this project?
Do you have a good contractor with a track record of building these type projects on time and on budget?
Will your small community be able to absorb this new building?
Will your small community allow this amount of new building? Many don’t want rentals and will fight you.
Are the older units you are planning on buying also in the same community?
Have you done a cash flow analysis on each deal to see if the deal is worth doing? If so, are the returns worth the risks to you?
Have you analyzed your market to see if what you’re proposing on building is atually what the renters want?
Once you know these answers, you’ll be in a better position to make final decisions.
Good luck,

Purchasing older rentals or building new??? - Posted by M wille

Posted by M wille on March 14, 2001 at 15:12:47:

3-14-01, Reading thru all the questionsa and answers gives me more questions we are planning on purchasing some older rental units, they will need some repair one is a single family dwelling the others are a 4 plex and possibly a duplex as I mentioned the plexes are older and need updating we will be doing minimal at this time. this would only be done with a good price. However we also have the chance to build new one family 2 bedrooms, we have the property and enough for possibly 14 units and one a 4 plex. we are located in a small community of 2800. AFter reading some discourage 2 bedroom single family, would appreciate any thoughts for or against. we don’t have all the figures toether but I’m told the cash flow is lower on the new units
for a while, anyone have any expertise on this issue??

thanks mwille

Re: Purchasing older rentals or building new??? - Posted by Lazaro

Posted by Lazaro on March 15, 2001 at 18:08:29:

Well the cost per unit for new units will be much higher than older ones. You must make sure that you get the property at a very good price and factor in the cost for renovations. If you add the purchase price and the cost of renovations you should have the total cost. Then, make sure that that total is lower than the appraisal to insure that you got a good buy. You don’t want to pay as if they were new. I would personally by older units and renovate them. I think a 2 bedroom home would be good in a small area. Is this a retiree community? If so this may be a good area to buy 2 bedrooms. I have 2 bedroom homes and have no problems renting. Hope this helps.