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Merits and Demerits of Building a House from Scratch

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Building a house from scratch for rental purposes or outright sale has its merits and demerits as compared to renovating an existing building.  

Merits

  1. You can have an input on the architectural design of the house. You can decide how the external view and the interior of the house should look like. Creating an area with good and easy to move around living space can make the apartment appealing to tenants.
  2. You can decide the budget for the project. Based on your estimated selling price for the proposed property, you can decide on the budget you want to put into the investment to give you a reasonable profit margin.
  3. You can decide the number of bedrooms for each apartment. Most times with a good survey of the vicinity you will be able to tell what kind of apartment will rent faster and give higher returns. Example the difference between 1-bedroom apartment and 2- bedroom apartment or 2- bedroom apartment and 3- bedroom apartment may not be much. As such fitting in less number of bedrooms may result in more apartments thus more returns.
  4. You can decide on the number of apartments the building should have. Based on the budget you are willing to spend, you can decide to make maximum use of the land. You can design the house to take more apartments while putting into consideration parking space for the tenants.
  5. You can decide on the size of the living space in the apartment i.e. the living room, bedrooms, bathrooms, laundry and kitchen. Note: Experience has shown that bigger apartment living space does not necessary command more rental rates.
  6. You can decide on the finishing. Using good beautiful tiles, doors, windows, cabinets, electrical fittings and plumbing fixtures could make the apartment more inviting and spacious for tenants but it has to be within the budget.
  7. You can enjoy the satisfaction that comes with being involved in the construction.
Demerits

  1. It is time consuming. It takes more time to build a house from scratch than renovating under normal condition.
  2. It is usually more stressful. Going out to buy the building materials and handling contractors or workmen are very stressful. Most especially if you are handling every aspect of the construction work yourself.
  3. Stealing / damaging of materials is imminent. Most often than not a good fraction of the building materials are either stolen or damaged by the workmen during the entire duration of construction. Also more materials may be used due to unanticipated rework of some part of the building resulting from construction errors.
  4. It may cost more than planned budget. If you have set aside a specific budget for the house, you may end up spending a lot more due to wastage or rise in the cost of materials in the market. Some aspect of the construction may have to be reworked due to poor handling or technical know-how by the workmen.
  5. The final look of the building may be different from what you initially assumed.
Selection tips before you purchase the land site for building a rental property

What I Wish I Knew Before Investing In Rental Properties

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Comments

  1. Mictec LtdFebruary 23, 2020 at 10:17 AM

    Investing money in homes for rent is a pretty good business idea.
    In the long run, real estate should increase in value.

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