When purchasing single-family rental properties, selecting a recently built home has both advantages and disadvantages. While newer properties offer benefits like more customization, higher energy efficiency, and less maintenance in the first few years, all these things may cost you more upfront. This is often true because upgrades aren’t cheap and because there is usually very little room to negotiate on price. No matter which property you choose, it’s crucial to weigh all the pros and cons carefully to ensure you get a solid return on your investment.
Investing in New Construction Rental Properties Can Be a Smart Move
In many ways, purchasing a new property to use as a rental might be a promising investment. New construction offers investors the chance to buy and immediately rent out a clean, attractive rental home with numerous exquisite additions. Because the upgrades are included in the purchase price, you will have little, if any, out-of-pocket repair and improvement expenses to get the property ready for your first tenant.
If the new home is immediately ready for occupancy, rental revenue can begin right away. Investors can customize the rental home to appeal to a specific renter demographic by using a variety of upgrades included in the price of a new home. For example, a new home that has been renovated with smart technologies is more likely to appeal to a Millennial renter than one that has not.
Benefits of Modern, Energy-Efficient Properties
A new home offers renters something older properties cannot: the opportunity to be the first and only tenant who has lived in the house. Tenant appeal is a crucial component of any successful rental property. A new property also provides renters with significant utility savings, as newer homes are generally more energy efficient. Renters wishing to stay long-term may be particularly drawn to these qualities, as well as the potential of living in a modern, low-maintenance, energy-efficient house for many years.
While these are all compelling reasons to invest in a new home for your next rental property, there are a few drawbacks to consider. For example, keep in mind that not all builders are created equal, and some may use cheap materials or take shortcuts in order to save money.
Purchasing shoddy construction might result in repeated haggling with the builder to get things done correctly, as well as higher repair and maintenance costs if they are unable to execute the work appropriately. Another disadvantage is that there are frequently fewer options accessible. Although customization is feasible to a degree, it is frequently a matter of choosing from a limited choice of wall colors, countertop types, and so on, or risk driving the purchase price up even more.
Is New Construction Right for Your Investment?
If you’re an investor who likes a good bargain, buying a new home might not be the best option. The market or a previous owner do not always decide the price of new construction, thus there is often room for bargaining.
When you’re buying from a builder, they may be less open to negotiation because lowering the base prices on their homes alters the data on comparable properties in the community and encourages future buyers to try to negotiate them down as well. Of course, depending on the circumstances, this position may vary, and it’s always a good idea to ask for any available discounts or other financial incentives.
Before purchasing a new home to utilize as a rental property, it is crucial to consider all of the advantages and disadvantages. However, with so much to consider, it can be difficult to determine whether a new property is a good investment for your market and demographics.
You require specific market information, such as that provided to all Waltham property owners working with Real Property Management Commonwealth. We conduct market assessments on all potential rental properties, ensuring that owners who work with us have the tools and knowledge they need to make sound investment decisions. For further information, contact us online or call 501-303-6870
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We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
