Selecting a recently built home has both advantages and disadvantages when purchasing single-family rental properties. Newer properties may cost more up front, but they may offer benefits like more customization, higher energy efficiency, and less maintenance in the first few years. This is often the case because changes don’t come cheap and there isn’t much room for price negotiation. This is important no matter which property you choose: 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
Purchasing a new property to use as a rental can be a promising investment in many ways. New construction gives investors the chance to buy and immediately rent out a clean, attractive rental home with many lovely upgrades at a reasonable price. There won’t be many out-of-pocket costs to get the property ready for your first tenant because the upgrades are included in the buying price.
If the new home is ready to move into right away, renters can start making money right away. A variety of upgrades included in the price of a new home can help investors customize the rental home to appeal to a specific renter demographic. For example, a Millennial renter is more likely to be interested in a new home that has been updated with smart technologies than one that has not.
Benefits of Modern, Energy-Efficient Properties
Tenant appeal is a crucial component of any successful rental property, and new houses provide renters with something that older properties do not: the opportunity to be the first and only tenant who has lived in the house. Due to the fact that newer homes are typically more energy efficient overall, renting a new property also offers tenants significant utility savings. Long-term renters may be especially interested in these features and the idea of living in a modern, low-maintenance, energy-efficient house for many years to come.
While these are all good reasons to buy a new home for your next rental property, there are also some drawbacks to think about. It’s important to keep in mind that not all builders are the same, and some may use cheap materials or try to save money by taking shortcuts.
If you can’t get the builder to do the work properly, buying shoddy construction can result in endless haggling with the builder and higher repair and maintenance costs. The fact that there aren’t always a lot of choices is another con. Although there is a degree of customization available, it is typically a matter of choosing between a limited selection of wall colors, countertop styles, and other options, or risk driving the purchase price up.
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 choice. There is frequently room for negotiation in the price of new construction because it is not always set by the market or a previous owner.
When you’re buying from a builder, they might not be as open to negotiation because lowering the base prices on their homes changes the data on comparable properties in the area and encourages future buyers to try and talk them down as well. It’s always a good idea to ask for any available discounts or other financial incentives, and this situation may change based on the circumstances.
Before purchasing a new home to use as a rental property, it is important to consider all the pros and cons. It can be hard to tell if a new property is a good investment for your market and demographics, though, because there are so many things to think about.
You need detailed market information, like the kind offered to all Salem property owners working with Real Property Management Hometown. We perform market assessments for all potential rental properties, ensuring owners who partner with us have the tools and information they need to make the best investment decisions. For more information, contact us online or at 501-701-4702 or 501-303-6870.
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.
