When purchasing single-family rental properties, opting for a recently built home brings with it both pros and cons. Newer properties offer several benefits, including more customization, higher energy efficiency, and less maintenance initially. However, these benefits may come at a higher upfront cost. This is often because upgrades can be expensive, and there’s generally little opportunity 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
Purchasing a new property to use as a rental can be a promising investment from many perspectives. New construction allows investors to buy and immediately rent out a clean, attractive rental home with modern upgrades. Since these upgrades are included in the purchase price, there are usually minimal out-of-pocket expenses for getting the property ready for your first tenant.
If the new home is ready for move-in, you can start earning rental income right away. The upgrades included in the price of a new home also allow you to customize the rental home to fit the preferences of a specific renter demographic. For example, smart technologies in a new home will likely appeal to a Millennial renter over a home without such upgrades.
Benefits of Modern, Energy-Efficient Properties
One key element of a successful rental property is tenant appeal, and new homes offer something older properties cannot: the opportunity for renters to be the first and only tenant to have lived in the house. Additionally, new properties typically offer renters significant utility savings due to better energy efficiency. Renters looking to stay long-term are especially drawn to the idea of living in a modern, low-maintenance, energy-efficient home.
While these are good reasons to invest in a new home for your rental property, there are some potential drawbacks. Not all builders provide the same level of quality, and some may cut costs by using cheap materials. This could result in ongoing issues with the builder or increased maintenance and repair expenses if the problems are not fixed properly.
Another challenge is the often-limited customization options available. While there is some flexibility, it’s typically restricted to a small set of choices, such as wall colors or countertops. Expanding beyond these options could raise the overall price even higher.
Is New Construction Right for Your Investment?
If you’re an investor who looks for bargains, buying a new home may not always be the best choice. The price of new construction is typically set by the builder and isn’t always influenced by the market or a previous owner, limiting room for negotiation.
Builders may resist negotiating lower prices since it can affect the data on comparable properties in the neighborhood, encouraging future buyers to request the same. However, situations can differ, so it’s always wise to ask about any discounts or financial incentives that may be available.
Before purchasing a new home for use as a rental property, it’s crucial to weigh all the pros and cons. Determining whether a new property is a good fit for your market and demographics can be a challenging decision.
You need detailed market information, like the kind offered to all Kapolei property owners working with Real Property Management Honolulu. 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 808-445-9500.
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