Any reason to buy a *new* house for rental prop investing?

Question

Hi everyone,

My girlfriend and I are looking into buying our first property for rental property investing. We were recommended a real estate agent from the area (DFW, TX) and this agent seems to be focusing exclusively on newly or recently built houses.
We were wondering if there are any particular reasons to buy a new house for rental property investing vs an older property. I could think of only two reasons: 1) the new houses are easier to manage maintenance-wise/repair-wise and 2) these are the properties the agent has access to.

I would really appreciate your input! Thanks!

Nathan Gesner · Answer

@Nikolay G Korovaiko And as an aside, I would recommend against purchasing investment property with a girlfriend. It's not wise to mingle assets until there is a long-term commitment.

Nikolay G Korovaiko · Answer

Hi Nathan,

Thank you for your reply! It sounds like new houses might be also easier to analyze as there are fewer items that go into an expense column, also some items from the said column might go up: property taxes, monthly mortgage payments as Theresa mentioned below.

Kenneth Garrett · Answer

@Nikolay G Korovaiko

There must be some parameters you gave the agent for them to look at new construction or newly constructed.  In general new construction is difficult to cash flow unless your paying cash, if that’s the case, then I would be looking at my cash on cash return.   if I’m paying cash then maybe turnkey properties is where I would look also.

Rob Lee · Answer

The DFW area is constantly changing. If you are looking at areas with a great deal of new development like Melissa, for example, the options might be really old homes or really new homes. There are a few areas where there isn't a lot in the middle.

While less maintenance is a great reason to stick with new construction if you want to see more have a conversation about your parameters. In addition to the age of the home, you want to review location, budget, size, and number of stories if that's important to you.

Best of luck in your search.

Tracy Streich · Answer

Price point is an issue.   If you can afford to buy a new construction rental that is great.  Many investors cannot enter at this price point.   We sell and manage properties and have had great success with new construction.   Very easy to manage from maintenance side of things and this is usually the biggest ongoing issue

Nathan Gesner · Answer

@Nikolay G Korovaiko You should only invest in properties that cash flow. there are benefits to purchasing a new home but there are benefits to purchasing a dilapidated clunker, as well. You need to educate yourself on how to analyze properties in what 'cash flow" really means.

Theresa Harris · Answer

Where I am we have extra taxes on new builds, so that is a negative for me. As others mentioned, the new builds (if built well) should have fewer problems than a older home.  Layout and size of rooms also differ where some of the new homes have smaller bedrooms.

Bob Okenwa · Answer

The agent has access to every home listed on the MLS unless there are specific realtor notes barring entry until a contract is accepted.

You haven't mentioned what you have set as criteria so I cannot assume the agent is doing this on his/her own volition. Make sure you communicate what you are trying to do and what kind of properties you are looking for.

New homes have fewer headaches and are more appealing. Older homes may have more equity, but typically come with question marks in terms of their condition.

Justin Tsoi · Answer

It all boils down to the price and location. My gf and I will be purchasing a newly built property next year through our agent for our next investment. In my personal scenario, the purchase price will be at a 15% discount at a growing location (new restaurants, highways, and houses are being built). We'll be provided with the floorplan which will tell us exactly what to expect. I won't have to worry about any major repairs for the next 10+ years. The only downside is cashflow, looking at $200-$300/month but I'll take that any day on a newly built property. The key here is to find the right agent or builder in which you can trust. Good luck to you!

Mike Dymski · Answer

We can't answer your question without the numbers.  The returns should drive investment decisions (projected ROI, IRR, etc.).  Hiring an agent and buying new construction in hot real estate markets can be a speculative strategy without in depth market knowledge.  Heck, it was one of the causes of the 2008 housing crisis.

Any reason to buy a new house for rental prop investing?

Most Popular Reply