Thinking About Investment Properties?
Investing in real estate is a great way to generate passive income, but many homeowners and investors wonder: Can I build an investment property instead of buying one? The short answer is yes. Building a custom investment property can give you more control over design, quality, and potential profitability. Whether you’re looking to create a long-term rental, a vacation rental, or a multi-family property, the process of building an investment property has a lot of advantages.
What Are Investment Properties?
An investment property is a property purchased or built to generate income, either through rental payments or capital appreciation. The most common types include:
- Long-term rental properties – Homes or apartments rented to tenants on an annual or longer basis.
- Short-term vacation rentals – Properties rented for short durations, typically through platforms like Airbnb or Vrbo.
- Multi-family properties – Duplexes, triplexes, or apartment buildings designed to generate higher rental income by accommodating multiple tenants.
While most investors purchase existing properties, building one allows you to create a space that’s tailored to your goals. Custom-designed investment properties often come with a range of benefits that you can’t find in pre-built homes.
Benefits of Building an Investment Property
If you’re considering whether to buy or build, here are some of the key advantages of building an investment property:
Control Over Design
When you build an investment property, you get to design the layout and features. You can make sure it’s optimized for maximum rental income—whether that’s including multiple units in a multi-family home, adding energy-efficient appliances, or designing for low-maintenance upkeep.
Better Appreciation Potential
Newer homes tend to appreciate faster than older homes, especially in areas with growing demand. Building allows you to create a property that’s up-to-date with modern designs, energy efficiency, and desirable amenities.
Reduced Maintenance Costs
New homes typically require fewer repairs and have lower maintenance costs in the first few years, allowing you to save money on upkeep. Building an investment property with durable materials can also further minimize costs down the road.
Customized to Your Market
If you know your rental market well, you can design your property to meet the specific needs of your potential tenants. For example, if you’re building in an area with a strong short-term rental market, you might opt for an open floor plan and amenities that appeal to vacationers.
Key Considerations Before You Build
Building an investment property is a significant commitment, and there are a few important factors to consider before moving forward:
Location
The location of your property plays a major role in its potential for success. High-demand rental areas, like those near universities, downtown districts, or popular vacation spots, tend to offer higher returns. Make sure to research local rental trends and consider factors like proximity to schools, shopping, and public transportation.
Financing
Financing the construction of an investment property often involves different loan options compared to purchasing an existing home. You might need a construction loan or an investment property mortgage, both of which may have different interest rates and terms. It’s essential to work with a lender who has experience with these types of projects.
Market Demand
Understanding local market demand is key. Is there a strong demand for long-term rentals or short-term vacation properties in your area? Will your target tenants be families, young professionals, or vacationers? Designing your property with your ideal tenant in mind can help ensure that you attract renters quickly and maintain high occupancy rates.
Using an Investment Property Calculator
One of the best tools you can use before starting your build is an investment property calculator. This tool allows you to estimate the costs of your project, including construction expenses, financing, taxes, and potential rental income.
An investment property calculator also helps you calculate key metrics like:
- Cash Flow: What your monthly rental income will be after expenses.
- Return on Investment (ROI): The profit you’ll make compared to the amount invested.
- Cap Rate: A percentage that helps measure the profitability of the property relative to its price.
Using an investment property calculator will give you a clear picture of your potential returns, so you can determine whether building is the right option for you.
Building an Investment Property with Roots Builders
We specialize in creating custom homes that are not only designed to fit your personal needs but also optimized for investment. Whether you’re building a long-term rental, short-term vacation rental, or multi-family property, we understand what makes a property attractive to tenants and how to ensure it’s built for long-term value.
Our experienced team guides you through every step of the building process—from design and budgeting to securing permits and completing construction. With our expertise, we’ll help you create a property that aligns with your investment goals and is tailored to meet the needs of your future tenants.
If you’re ready to start building your investment property, we’d love to work with you. Learn more about our custom home builds here.
Example of a Successful Investment Property: Kingsbury Manor
At Roots Builders, we’ve had the privilege of designing and building investment properties, one of which is the stunning Kingsbury Manor. This property is a prime example of how a custom-built vacation rental can thrive in the competitive short-term rental market.
Located in the heart of Cedar City, Kingsbury Manor was designed with both luxury and functionality in mind, providing guests with a memorable experience while maximizing rental income for its owner. Drawing inspiration from the acclaimed works of J.K. Rowling, we brought this magical vision to life with custom-themed bedrooms, bathrooms, a game room, and an indoor theater.
Want to learn more about how we brought Kingsbury Manor to life? Check out our full portfolio here to see more of our work.
Are Building Investment Properties the Best Choice For You?
Building an investment property can be a smart decision if you’re looking for more control over your real estate investment. It gives you the opportunity to customize your property, create long-term value, and minimize future repair costs.
However, it’s not the right choice for everyone. If you need immediate rental income or don’t have the time or resources for a construction project, purchasing an existing property might be the better option.
Ultimately, whether you choose to build or buy depends on your goals, timeline, and budget. If you’re ready to explore the potential of building an investment property, schedule a consultation with us to start the conversation!
