When purchasing single-family rental properties, choosing a newly built home has both advantages and disadvantages. While newer properties have benefits such as greater customization, higher energy efficiency, and less maintenance in the first few years, all of these may come at a higher initial cost. This is generally true because improvements are expensive and there is usually limited room for price negotiation. 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
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.
Rental income can start right away if the new home is immediately ready for occupancy. 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 homes offer something that older homes don’t: the chance to be the first and only tenant who has lived in the house. Since newer homes are generally more energy efficient, renting a new property also offers tenants significant utility savings. People who want to rent for a long time 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.
There are many good reasons to buy a new home as your next rental property, but there are also some bad ones to think about. To give you an example, keep in mind that not all builders are the same, and some may use cheap materials or try to save money by cutting corners.
If you can’t get them to do the work the right way, buying shoddy construction can result in endless haggling with the builder to get things done right, as well as higher repair and maintenance costs. As another con, the number of options is often very limited. Although customization is possible to a degree, it’s usually a matter of choosing from a small number of wall colors, countertop styles, and other options, 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 choice. The price of new construction is frequently subject to negotiation, as it is not always determined by the market or a previous owner.
When you are buying from a builder, they may not be as open to negotiation because lowering the base prices on their homes alters the data on comparable properties in the neighborhood 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 because, of course, this situation could change contingent on the facts.
Before purchasing a new home to use as a rental property, it is imperative to evaluate all the advantages and disadvantages. However, it can be challenging to determine whether a new property is a viable investment for your market and demographics due to the abundance of factors to consider.
You need detailed market information, like the kind offered to all Bangor property owners working with Real Property Management Acadia. 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 207-561-7482
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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.
