Updated over 11 years ago on . Most recent reply
New construction sfr vs older ones?
New here. First post and learning a lot! A question and I'll try to be clear... The strategy I would be most likely to pursue is buy and hold. The question is are there advantages to constructing new sfr's to rent vs. buying existing ones? Obviously maintenance costs should be much lower, thus resulting in greater monthly cash flow. All things being equal ( location, schools, etc) is new construction ever preferable to purchasing older homes at good prices? I've looked around some on here and haven't found a discussion like this? Thanks!
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Welcome to BP Nation. Great question right out of the gate! I am not sure where Tolar, TX is and I will premise this answer with I don't know your market or the current conditions. That said, for at least 6 years and possibly 8, the cost to build vs. the cost to buy existing was much more. Your acquisition costs have a ton to do with your cash flow. While your point is well taken that a new home will have less expenses typically for the first 5 years or so, don't be fooled into thinking it is that bid of a difference. I have seen new build homes with problems after problems whereas an older one with very minor ones. Your best bet is to find a deal where the total acquisition costs (including any deferred maintenance) are an amount that will equate to a positive cash flow return. That may or may not be a new build, likely not.
The beauty of buying the existing older home is that your inspection will uncover needed repair items and life expectancies of your capital items. If you account for them at purchase, you will likely be better off with that type of deal.