OOS Investor - New Construction vs Rehabbing Existing Properties

Rental Property Investor · Los Angeles · Member since 2020 · 88 posts · 74 votes

Hello BP members,

I am an OOS investor based in CA looking at new construction vs rehabbing existing properties

I had a few questions:

1. Do new home builders sell to OOS investors ? I know some only sell to people who will use as their primary residence.

2. What is the expected rent to value ratio ? I'd be happy with a 0.75 or higher RV ratio given new construction has lower CAPEX/maintenance.

Thanks for any insight.

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Joseph Schweizer

Investor · Member since 2020 · 291 posts · 592 votes

Hi @Steven Nguyen!

I have heard @Zach Lemaster has some new builds in Florida. Upon a quick look, it seems like they meet your 0.75 goal. Might be worth a look if you are interested in Florida!

Best Wishes!

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Will FraserPro Member
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
5y
Hi @Steven Nguyen, you'll find many builders averse to selling their homes to investors, but fortunately there are others who will and this can be done with success.
As you stated in #2, the primary benefit of new construction is that everything in the home is at year 0 of its lifecycle. This makes budgeting for replacement of items like HVAC, Windows, appliances, Hot Water Tank, etc much simpler :)
You can hit 0.75 in many markets. I'd be suspicious of anything above 1% in new construction simply because of the cost of construction these days . . . it may be possible but I'd lean into the underlying reasons why rent is so high if new construction homes can be purchased at that RV ratio.
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Joseph Schweizer
Investor · Member since 2020 · 291 posts · 592 votes
5y
Hi @Steven Nguyen!

I have heard @Zach Lemaster has some new builds in Florida. Upon a quick look, it seems like they meet your 0.75 goal. Might be worth a look if you are interested in Florida!
Best Wishes!
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Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
5y
@Joseph Schweizer

Thanks for the mention!

@Steven Nguyen
Yes, we have new builds that fit your criteria to offer cash flow, appreciation, immediate equity (home is worth more than you pay for it upon completion) all in an A class location that serves an affluent tenant demographic! Many new builds we've done in the past have been hard to cash flow well, or offer attractive returns, but we do have some interesting opportunities now that do offer good cash flow on the new builds in a few different locations. I'm happy to answer any questions you have on these. Here are some other BP threads from investors that have personal experience with the new builds.
https://www.biggerpockets.com/users/ZacharyCole/references

https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review
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