Investing in new construction

3 Replies

Hello BP,

I have a question that I want to ask the masses since I am very new to the rental game and only have one rental property.

What is everyone's take on investing in new construction with the intent to rent it out right away? I live and invest in San Antonio and there are new neighborhoods and new houses being built all over; would it be wise to buy one and put a tenant in it right away? 

Secondly, is it legal or allowed to buy a new house in a neighborhood and rent it out? Or are there rules and policies against renting new construction?

Any and all responses are appreciated! 

Thank you in advance, BP!

Anthony,

My take is that if they can do the same thing with multi-family then why not sfh. The potential is there, although I’m not sure if anyone has tried it. It has been rumored (I cannot confirm that this is the actual intent of the developer) that there is a new housing development going in on Culebra and FM 1560 that is exactly what you are asking about. A whole development of new construction sfh for rent.  As far as if it’s allowed in other neighborhoods, you would need to check with the hoa’s. 

@Anthony Finger Renting a new house should be legally allowed, unless it is a condo or coop that has some sort of renting restrictions. For anything like check with the local town authority. In terms of whether it's wise to buy a new construction, a lot of investors are looking to buy SFH or MFH that has a Value Add component. This allows to renovate a property or bump up the rent and add value and potentially use Cash Out/Refi strategy down the road. With the new construction, there is no value add - you're basically buying a TK solution. So you just need to calculate whether it will cash flow for you based on the local rents in the area.

Best of luck!

The only problem with buying new and renting is you usually can't get a loan that has a mortgage low enough that will allow for cash flow. Obviously that depends on the area and everywhere is different. 

Unless of course you put up a huge down payment. But then your CoC is going to be low. I know several people that do this with a couple houses (usually less than 5) but they do it as a retirement plan type investing. Not a cash flow to live off of investment. So it really depends on what your goal is.