New Construction vs Old what appreciates better long term?

Question

Hi, I am actively looking and putting offers for my first rental property, I just saw a townhome that I like from the 70's that needs some rehab, and a few blocks from it there is new development offering same type of units (a bit bigger) 10% more expensive with delivery lead times of 6 months. My strategy is long term appreciation with breakeven cashflow (for now), so the question is what do you guys think is a better investment long term? Thanks

Jorge

Jake Andronico · Answer

@Jorge Martínez

100% of homes break. It's not "if" but "when".

If the new builds are larger and you do not need to do any work, that would be the option I'd choose personally.

If they're 10% more expensive, is that after renovation cost or before? If the renovation cost makes the total purchase creep up very close to the new build, I think it's a no brainer.

If it's from 1974 in 30 years it'll be 80 years old. In 30 years the new build will be 30 years old.

Others may disagree completely, but just my thoughts :)

Best of luck to you!

Ryan Cheek · Answer

Hi Jorge,

It sounds like you're at an exciting stage in your investment journey! Given your strategy of long-term appreciation with breakeven cash flow, here's my take:

Both options have their merits. The townhome from the 70s, with some rehab, could offer immediate equity if you can purchase and renovate it at a lower cost compared to the new development. Plus, older properties in established neighborhoods often have more stable appreciation over time.

On the other hand, the new development, though slightly more expensive, might offer modern amenities, energy efficiency, and potentially lower maintenance costs. If the area is up-and-coming, it could appreciate well, especially as more development occurs.

Ultimately, it depends on your risk tolerance and how hands-on you want to be. If you’re comfortable managing a rehab and want to build equity quickly, the older townhome might be a better fit. If you prefer something with less immediate work and are willing to pay a premium for a newer property, the new development could be the way to go.

Good luck with your decision! Both paths have great potential.

Best,Ryan

Robert Ellis · Answer

build new don't buy new and don't buy existing. find your own land, entitle it, control the full process, get architects, zoning attorneys, roll your sleeves up it isn't easy but it's big money.

Bjorn Ahlblad · Answer

The high cost of maintenance including materials and labor affect all properties and older ones perhaps more. What will affect the cost of older real estate more today is the price and availability of insurance. Carriers are becoming very picky about age and location as many of us have seen recently.

Theresa Harris · Answer

I wouldn't worry as much about the age as I would what it would cost, how much it would rent for, how well it is built and when major repairs will be needed (ie how long will the roof last).

Also for the two-are they both condos (ie strata/condo fees) or is one freehold and the other a condo (ie one has condo fees and the other doesn't)?  If they are both condos, knowing what the monthly fees will be along with the reserves and how well they are run is critical.  In Vancouver 20+ years ago, a bunch of condos were built and they were not built properly and had to have massive repairs done due to water damage on the outside (we called them leaky condos).  So that is a good example of newer may not be better.  It was a large number of condo buildings throughout the area, not just one complex.

Bradley Buxton · Answer

@Jorge Martínez

If the builder is offering incentives to buy down your interest rate and if there is some negotiation room on price the new builds can be a good investment because you'll have a lower monthly payment and new builds usually come with some type of warranty and will have lower maintenance cost because everything is new. Rents can also be slightly higher on new builds.

New Construction vs Old what appreciates better long term?

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