New construction with lender incentives?

Question

Hey all! West coast out of state investor here looking to purchase my first rental.  I've looked at a lot of resales and with the high interest rates, I'm wondering if I would be better off purchasing a home that is new construction that offers "5.xx% fixed 30 year rates and 10k in builder credits." I was looking at the Queen Creek / Phoenix area.

I know this is not a BRRRR and won't make that crazy return on investment, but if I'd like to build equity and if I can cash flow $100 a month, that would be ideal.

Any thoughts or criticism would be greatly appreciated.  Thanks!

Mason Weiss · Answer

Working with multiple investors looking at new builds right now for the closing incentives and warranties. Meritage Homes in San Tan Valley (North side of the city) is offering 6% which makes the numbers start to look promising for an investment perspective.

Down side to new construction is there is hardly any negotiation. You pay the sticker price and that's final.

Brian L Harris · Answer

My experience with Lennar in Maricopa County has been very positive. They have different communities and price points. There is a good community near the new chip plant ( world's largest chip plant called TSMC) called Cooper Leaf. $600's. They build the same models everywhere so you have to pick the area of the valley you want to be.

I would also suggest you look at Meritage. Right now they have 30 year fixed in the 5% range for inventory that they can move by year end.

I would also suggest you look at Meritage. Right now they have 30 year fixed in the 5% range for inventory that they can move by year end.

Noah Corwick · Answer

You're welcome! I am a Realtor & Investor myself and am here if you would like to continue our conversation.

Kevin Lee · Answer

Thanks so much for your input.  This is what I gathered as well but one realtor I was speaking to said they use them because they are reputable in that area.  Thank you again!

Noah Corwick · Answer

You're welcome Kevin. Lennar is not regarded very well.

Here are some reviews I found online as examples: https://www.consumeraffairs.com/homeowners/lennar-homes.html...

A lot of these are from customers outside of AZ, but the experiences are likely to follow regardless of state.

Kevin Lee · Answer

Thank you!  Makes a lot of sense.  Would you happen to know anything about Lennar and the San Tan Valley / Queen Creek?

Noah Corwick · Answer

Hi Kevin!

In my experience, a lot of new builds here in the Valley offer a 2-1/3-2-1 buy downs instead of a fixed lower rate. I would confirm with the developer's sales team on how the terms break down. Also there are also annoying hidden/inflated fees when working with a developer's preferred lender that are "fun" to work through.

Also make sure you work with a developer who is trusted, well regarded, and has great reviews. I know it's a "no duh" thing to point out, but new builds can be troublesome construction wise sometimes.

The area will be key as well, as there are a lot of new builds in AZ that are in locations that will take time to appreciate. It certainly can be worth the wait, but you have to be able to mentally and financially budget for this and plan accordingly.

Overall I believe it's definitely a route worth with exploring, but obviously will be reliant on how the numbers look.

New construction with lender incentives?

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