Real estate investors have various strategies to grow their wealth, including purchasing existing properties or building new structures. Each method has its advantages and disadvantages. Our team at Magis Funding Solutions, can help you compare these strategies to make an informed decision.
Pros of Investing in Existing Properties
Negotiation Potential
Buying an existing property allows for easier negotiation. Nearly 40% of sellers reduce their asking prices, according to the National Association of Realtors, providing opportunities for cost savings.
Lower Purchase Price
Existing properties typically cost less than new constructions because you avoid expenses like architectural designs and construction materials. Securing a loan for an existing property is also more straightforward.
Established Neighborhoods
Existing homes are usually in established neighborhoods with known amenities, schools, and income levels, reducing investment risk.
Better Location Options
You have more choices with existing properties, from prime locations to affordable areas. New constructions are limited to available vacant land.
Cons of Investing in Existing Properties
High Repair Costs
Repair expenses can add up, especially if the property has major structural issues. Even numerous small repairs can reduce profit margins.
Market Fluctuations
Existing properties are more susceptible to market fluctuations than new constructions, which tend to retain their value better.
Lower Rental Rates
Older properties often attract lower rental rates compared to new constructions, making them less appealing to renters.
Less Energy Efficient
Older homes are generally less energy efficient due to outdated building materials and appliances.
Pros of Investing in New Construction
Build to Suit
Ground-up construction allows you to tailor buildings to meet specific needs, such as houses, apartments, retail spaces, or offices.
Instant Equity
The value of new construction typically boosts the land’s worth, offering instant equity that can be used for refinancing.
Higher Appeal
New buildings attract high-income tenants or buyers willing to pay more, reducing the risk of long market times.
Construction Warranties
New constructions come with warranties on parts and materials, offering protection against defects and poor quality.
Cons of Investing in New Construction
Timeline Delays
Construction projects often face delays, disrupting the building process and causing frustration.
Cost Increases
Time delays can lead to increased costs due to rising material prices or the need for more expensive contractors.
Location Restraints
New buildings can only be erected on vacant land or sites requiring demolition, limiting location options.
Unknown Market
With new construction, the surrounding market is uncertain, making it hard to predict neighborhood development.
Let Magis Funding Solutions Help You Meet Your Investing Goals
Both existing properties and new constructions offer unique advantages and challenges. By understanding these pros and cons, you can choose the best strategy for your investment goals. For personalized advice, reach out to our team at Magis Funding Solutions.
