It’s possible to make money by buying older single-family houses to use as rental property. There are many pros and cons to choosing older homes over new ones, though. For instance, older homes often have a great location, a lower price, and a market rate that stays stable.
However, there are some downsides to buying an older home as well, such as a higher cost of repairs and improvements, lower energy efficiency, and the possibility of missing out on widespread renter appeal. When searching for your next investment property, both the pros and cons should be considered carefully before making any final decisions.
Benefits of Older Rental Homes: Prime Locations and Steady Income
Buying older homes to use as rental houses has many advantages. The location is arguably one of the biggest benefits an older home can offer. Older homes are often close to desirable social and commercial areas, in contrast to newer homes, which are often far from the best amenities in the neighborhood.
Millennial renters, young workers, and seniors who want to enjoy their retirement may be very interested in a rental home that is close to the city center or other attractions. Older properties, usually with more predictable rental rates, can be found in established neighborhoods. One of the most significant benefits of buying an older home is your ability to accurately forecast your rental income.
In many areas, older homes offer the benefit of being more affordable than new construction. This may considerably reduce the upfront cost of the property and give investors complete control over the amount of money spent on any improvements or upgrades. Investors can control costs by performing some of the work themselves or by planning projects to maximize cash flow, even though an older home will probably need some work.
Investors might also be able to count on better construction and a more traditional floor plan, depending on the age and condition of the home. Certain demographics, especially renters looking for a home with a unique look or feel, may be attracted to such features.
Drawbacks of Older Rental Homes: Costly Updates and Maintenance
Older homes may be appealing to investors from all over the country because of these advantages, but there are also some cons. A lot of the time, older houses have problems with their plumbing, wiring, heating and cooling systems, and other things. Additionally, they might have expensive code compliance issues. Older homes often have windows that are less energy efficient than newer homes, which results in higher energy bills and makes it difficult for renters to control the temperature inside the home.
Unlike essential maintenance and repairs, older homes carry the risk of expensive updates and improvements to make the home both safe for occupants and attractive to potential tenants. It’s necessary for investors to have faith in their ability to fund fixes, no matter how big or small, because the higher up-front costs may put a short-term strain on your cash flow.
Assessing Older Homes for Potential Issues
The population composition of the neighborhood may also be a disadvantage of buying an older home. Before buying in a neighborhood, it’s important to gather specific information on a neighborhood and look closely for signs of neglect.
A water main or sewer line upgrade may be necessary in the neighborhood where you choose to live, and these projects typically carry a sizable special assessment or tax to the owner that may be due right away. As the area loses value, property prices may be low, but so may the home’s expected future market value.
Older houses can be great investment properties, but if they are not handled properly, they can also be a drain on the investor’s money. Many old houses have features that newer homes don’t, but they need to be carefully looked at and compared to the market.
We at Real Property Management Washington DC can assist investors in evaluating and vet potential rental properties and can give them comprehensive information about the home’s neighborhood and the local rental market in H Street Corridor and the surrounding area. We’re committed to helping real estate investors pick the best properties to buy. To find out more, contact us online or call 202-813-9993.
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