With purchasing single-family rental properties, acquiring 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. There won’t be many out-of-pocket expenses to get the property ready for your first tenant because the upgrades are included in the sale price.
Rental income can start right away if the new home is immediately ready for occupancy. Investors can customize the rental home to appeal to a specific renter demographic by taking advantage of a variety of upgrades included in the price of a new home. For instance, 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. Because 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?
Buying a new home may not be the right option if you are an investor who likes a good bargain. The price of new construction is not always determined by the market or a previous owner, often requiring negotiation.
When you’re 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. Of course, this situation may change depending on the circumstances, and it’s always a good idea to ask for any available discounts or other financial incentives.
It is essential to weigh all the pros and cons before buying a new home to use as a rental property. But with so much to consider, it can be hard to know whether a new property is a suitable investment for your market and demographics.
You need detailed market information, like the kind offered to all Southwest Waterfront property owners working with Real Property Management Washington DC. 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 202-813-9993.
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.
