How to Save 15% on New Homes with No Negotiating

Building a home from scratch is an incredibly exciting undertaking. When you’re handed a blank canvas and a large catalogue of options and add-ons, you may feel tempted to splurge on every possible upgrade. 

If you’re planning on living there, by all means, go ahead and build your dream home. Install every fancy feature your heart desires and wallet allows. But if this is going to be an investment property you plan to rent out for the next few years, pump the brakes, and consider this:

Renters don’t care if your property belongs on the cover of Martha Stewart Living; they just want clean and reasonably priced homes. Any brand-new home with basic amenities and appliances is probably better than what they’re currently renting.

Further, did you know builders mark up most options 100 percent, and many refuse to negotiate on these prices? Why should you pay top dollar for things that will hardly affect your bottom line? 

You’re better off throwing out that catalogue of high-priced upgrades and embracing option-free building — a strategy that can easily chop at least 15 percent off the cost of your brand-new home. 

Which specific types of options should you avoid? Here are three:

1. Architectural flourishes 

Builders will undoubtedly offer you several types of exterior cosmetic upgrades. For example, you could pay $20,000 to have a few extra peaks added to your roof, $5,000 for cool dimensional shingles, and another $10,000 for brick on all four sides of the home instead of just the front. 

These expensive upgrades will surely boost the home’s curb appeal, but if you think they’ll boost your ROI, think again. You will be hard-pressed to find a renter who’s eager to pay more for fancy shingles and extra bricks. To echo the theme of many after-school specials: It’s what’s on the inside that counts.

2. Interior luxuries

Everyone needs a toilet, but not everyone needs an elongated toilet made of gold. The difference between a necessary item and a luxury item can make or break your profit. 

When weighing your options, never lose sight of a renter’s perspective. In all likelihood, she is currently using appliances that have 25 families’ worth of grime on them. Maybe her current rental doesn’t have a dishwasher at all, so the fact that yours has an $8,000 whisper-quiet dishwasher is irrelevant. Investing in basic appliances will be plenty sufficient. 

Furthermore, when it comes to flooring, don’t fool yourself into thinking tenants will care whether you’ve splurged on top-of-the-line hardwood or extra-thick carpet padding. The existence of any hardwood or carpeting is enough; renters aren’t caught up in the density of carpet pads — and they certainly won’t write you larger checks because your pads are 8 pounds instead of 4 pounds.

3. Luscious landscaping

If you’re building your personal dream home, feel free to purchase a plot of land on the edge of the woods, build some gorgeous flower beds, and install a tranquil koi pond.I’m sure you’ll cherish the view from the back deck, happily trim and water the flowers, and regularly feed the fish for decades. But do you think a tenant will take immaculate care of the fish and flowers, let alone pay extra for the privilege of doing so? Here’s a more realistic scenario: You’re going to pay a $20,000 lot premium for the cool view and $10,000 for your fancy foliage, and then you'll find yourself regularly buying new fish and plants because your tenants aren’t willing to take care of the current ones.

You don’t need to surround the house with gravel and eliminate all signs of verdant life, but you should keep the landscaping simple. Plant low-maintenance bushes and shrubs that are easy on the eyes but tolerant to long periods of neglect.

Cosmetic upgrades and premium appliances will add tons of money to the cost of your investment home — but hardly any money to your bank account down the road.

Always keep in mind that renters are looking for clean, well-maintained properties that offer all the essentials. They don’t care about golden appliances, water features, and carpeting that pampers their feet.

By avoiding the tempting trap of building a dream home, you also dodge a potential profit nightmare.