What would be more profitable? Building a 1900 sqft home including garage in the $120K price range or buying a REO for about 70% of market value including repairs and flippig it?

What advice would you have for someone trying become a builder or investor? I am in Dallas, TX area where market is still decent. I have $30k initial investment and would have to get the rest finance.

Questions you need to consider?

How much does the land cost you for new construx?
How fast can you get through the permitting process and get a house built to market?
Are you certain you can get am REO for 70% of market value?
How quickly could you get the REO into marketable condition or rentable condition?
If you have done neither before, the REO would be a less risky go, in my opinion.

But there is no way (for me) to determine which will be more profitable for you.

I would consider which one has the least downside potential.

The only reason I would like to build a home is because the small town that I live in is 35 mins from downtown dallas and the subdivision that I have in mind, houses sale very quickly. Granted that they are foreclosures, but they avg $70 sqft with an avg sales price of $112,000 and don't last more than 30 days on the market. There is a complete street in the subdivision with now houses and another with houses only on one side. Asking price for lots are $17k, but I figure I can easily get one for $15k. When they built out here in 2006 houses were marketed form $140,000-$160,000 and nobody wants to live out in the sticks for that kind of money. Now labor has gone down, cause of the bidding war(no work) so people will do the job cheaper to get the job.

But this is a long shot bc I have no experience in building, but my friends brother is a builder and I do know quiet a few people in the construction field. I just got to figure out how to put it all together.

I think building is riskier for at least one reason...time. I would imagine a new construx would take 8 to 12 months to complete. The market is volatile and could go crazy on you.

While the banks are lowering their prices on your competition, your fixed or rising costs could put you in an uncomfortable place.

If you say those foreclosures in your neighborhood sell in less then 30 days with an average sales price of $112k how are you going to buy one 70% of value? Generally foreclosures are priced and marketed at value. There is a reason usually that they seem to be priced low.

If you have no experience as a builder, and you only have $30,000 . . . . why would anyone want to take a chance on you?

I'd do some investigating and see if you can line up financing for either approach first. I wouldn't want to burst your bubble . . . . but I don't think the prospect of building a spec house is in the cards for you.

Yeah, if you have only $30k to work with, it may not even be a question of which is the better investment, it may be a question of which you can potentially get financing for.

In today's market, you would likely have a very difficult time securing financing for ground up construction on $120k with only $30k to work with. A fix and flip transaction, however, you could potentially find financing for either through hard money, or in conjunction with an equity partner. That is, of course, assuming your project is profitable.