Brand New Single-family House a Good Investment?

Question

Good Evening,Still looking to purchase my first real estate investment, started looking at local single-family houses instead of multifamily units because there are more on the market. Found a 1900sqft house that is listed for $444,900. It's been listed since August of 2022 and the price has only been reduced by $10k. Still pondering what to offer. The house was just finished being built in August of 2022. There are a couple more of the same house being built currently in the same neighborhood just a few lots over. My goal with this single-family property would be to house-hack it. Being that I've just graduated college, and my wife still has one more year left, we're looking to rent out the rooms for now. Eventually, when I go to law school back east, we will rent the house out to local college students. Is it smart to buy a brand-new development as my first investment? I've been thinking about using the BRRRR method, but being a brand-new house, there isn't anything to "rehab". Is the BRRRR method still something I can pursue?I appreciate the feedback,Matthew Phillips

LaJoy Toney · Answer

@Matthew Phillips I know exactly what you are talking about. I am in the same boat. Making the numbers make sense in newberg/mcminville is tricky but i KNOW in my heart that those places are up and coming and great investments with the right stratigies. Would love to link up and maybe bounce some ideas off eachother.

Grant Schroeder · Answer

@Nathan Gesner @Matthew Phillips rent by the room student rentals actually go for quite a bit more in Newberg. Nathan, you are correct that a traditional LTR would rent for $2200-$2400 looking at rentometer or the BP rent estimator, but have you ever actually invested in Newberg? We have two 4 bed student rentals in Newberg and they rent for $2825 and $2950 total with 6 college students in each house. You can get creative in a college town and still find wins. Especially if it is your first house hack and you are offsetting your housing expense and building momentum for your next purchase in REI, it could still be a good first purchase for you. It just depends on how you choose to look at it and get creative.

Lawrence Potts · Answer

The problem with this deal is the velocity of money, AKA how quickly you can refinance and get your initial investment back. So this wouldn't fit the BRRRR method. The rehab part is sweat equity, where you are forcing the value of the property to increase with improvements that are supported by location, neighborhood, comparables, etc. So there's not a lot of "meat on the bones" when you purchase something brand new (2022).You could still rent the rooms out and be okay (4 bedrooms @ $750/room = $3,000) but you'll have to wait longer to get that money back (could be a few years) to redeploy back into another deal.What it comes down to is do you need that money back asap? It is dependent on your situation. I would argue that if you're younger, you don't have that much capital and you may want it back sooner. But if you are going to law school for the next 4 years, you may be okay parking it in the house and then refinancing it back into your pocket after you graduate. It's up to you, but just from seeing this post and knowing some limited background information, there are better deals out there. This one isn't bad, it's just not great. What serves you better in getting to your long term goals?Hope that helps!

LaJoy Toney · Answer

Not to mention the Hospitals in close proximity. Furnished finders is a good strategy too. As soon as i can. thats my number one strategy, second being students , third, during summer rent out the whole property to wine tasters who are visiting for the weekend.

Bob Stevens · Answer

Please go to your local meetings and learn 1st, you are not ready to buy. LEARN 1st then apply what you learnGood luck

Nathan Gesner · Answer

It took me one minute to discover this is a solid loser. Even if you bought this for $400,000 the mortgage would cost you $2,600 a month. I looked at rentals in Newberg and this home would probably rent for $2,200 - $2,400. You would lose $200 a month and that doesn't include taxes, insurance, or setting aside money for maintenance, vacancy, capex, or cashflow.If you are going to invest, you need to have some basic understanding of how it works. Here's a guide that describes what good cash flow looks like and how to analyze a property. https://www.biggerpockets.com/...

Darnell Lockett · Answer

Hi @Matthew Phillips. It depends on what you're ultimately trying to do, AND if you can buy at the right price. Ultimately...the numbers must work for YOU. Run your analysis of the subject property and comps. Determine what rents are looking like and what you can possibly expect. Ultimately you have to do your homework to see if purchasing this property makes financial sense. BRRRR is a great strategy, but it's not the only strategy that works. Find what works best for you, and go for it!

Nathan Gesner · Answer

Even at $3000 per month, it's a loser. Mortgage: $2,600Taxes: $375Insurance: $150Thats $3,125 or a loss of $125 per month, conservatively, and we haven't even accounted for ordinary maintenance, vacancy, or any other expenses. Are you going to lose thousands a year waiting for appreciation?

Carlos Ptriawan · Answer

for brand new homes, just use it for your primary, not as rental, the brand new home usually appreciates faster in the same zip code compare to older one.

Corby Goade · Answer

A "deal" is a relative term and when you house hack the game and analysis can change signifcantly. Offsetting your expenses and ROI can get confusing in those situations.If you want to house hack a BRRRR- and that's honestly the best way to start, then a newer property won't work. You want to find, ideally, a small multifamily that needs updating but it's livable. Buy it with an FHA loan and move from unit to unit as you fix it up. Refi out of your FHA loan as soon as you have each unit updated and rented. Then do the same thing again next year. And the year after. Once you've repeated the process a few times, you'll find that work starts to become optional. You are in the perfect position and the right age to make this really simple and relatively stress free.Best of luck!