Build vs. Buy: Which Is Best for Your First Rental?

**Dave Meyer** (0:00)
Would you ever buy a house built in the early 1900s? If you answered no, you might be overlooking the best deals in your market. In some areas of the country, most houses are old, especially the affordable ones investors target. So if your buy box starts in the 1960s, you're filtering out a huge chunk of inventory, including some potential home runs. Old houses do require a different playbook. Some repairs are surprisingly cheap, like new electrical might run you only 5 grand, but foundation issues or bad plumbing could turn your promising new rental properties into a long-term money pit. The key is spotting those differences before you close. So today we're breaking it down. How to spot the old houses that are actually safe bets, which systems you absolutely need to inspect before closing, and the most common surprises hiding behind those old walls. Plus, we'll reveal the single best construction era to target on your next deal, the sweet spot where you can add value with modern updates, but the original build quality still holds up.
What's up, everyone? I'm Dave Meyer, here with my co-host, Henry Washington. Today, we're answering questions from real investors in the BiggerPockets Forums, and we're going to spend a lot of this episode talking about how to safely buy older houses. But our first question comes from an investor named Kyler in Birmingham. He says, Hey, everyone, me and my fiancee just got engaged. Congratulations, Kyler. And I've somehow convinced her to house hack for our first home in Oxford, Alabama. I don't know anything about Oxford, Alabama, but that sounds like it sounds like it feeds. So congratulations on that, too.
He goes on to say, Being in a smaller city, there's not a ton of residential multifamily properties in the area. Would it make sense to build a duplex as our first home, utilizing an FHA construction loan? I can't find much information on people taking this approach instead of finding a preexisting home. I understand that the cost will be higher and there won't be any opportunities to add value through renovation. But I wasn't sure if those were big enough reasons to look into a different direction.
I mean, this is a good question though, right? I mean, new construction has become pretty popular these days. So, Henry, what's your take?

**Henry Washington** (2:25)
Don't do it.

**Dave Meyer** (2:29)
Sorry, I guess don't do it is the simple answer here. But why?

**Henry Washington** (2:35)
Yeah, here's in all seriousness. I think that if you had construction experience, or you're in a situation where you have the resources necessary to pull this off, like you've got a great contractor that has a proven track record, you've vetted them appropriately, you've got the funds and everything all lined up, and you've got the time horizon to wait for it to be finished, then potentially, yeah, that's a really good idea because you're going to get the benefits of new construction and lower costs. But building isn't easy.
It's something typically that investors start to take on after they've had some experience doing some regular real estate deals, some value add deals, once they've got some more skills under their belt. So does it mean you can't have one built? I mean, people have personal homes built all the time. So if you were going to build a new home and you hire a builder and they take care of it all for you and the numbers make sense, then yeah, it might be a decent thing to do. But if it is something where you've got to go find the team, you've got to go get the loan and you've got to find the plans and hire the engineers, that's just a lot. It's quite an undertaking and you can make a lot of mistakes and it could not be as profitable or as easy as just going to buy something on the market.

**Dave Meyer** (4:00)
Yeah, I'm with you. I think this idea of build to rent, which is essentially what he's talking about, but build to rent combined with a house hack, good idea. I mean, I think the numbers probably would make sense, but execution wise, it's difficult for a couple of reasons. First and foremost, if you already had to convince your fiance to house hack and she was maybe a little resistant to that, I'm just going to throw out there that managing a construction project that you've never done before, might put some strain on your relationship.
Just, I don't know you guys, but I'm just going to throw that out there that one could imagine that it might do that a little bit. The second thing I would ask you, Kyler, is why not just somewhere else? Like maybe you live in Oxford, you're passionate about this place. I just looked it up. It looks like a small town. But like, is there another place where you could buy a multifamily and it would be existing and it wouldn't be that hard?