getting started in a market that has tons of brand new sfh construction

[Tyler Neison]

I live in East Louisville, KY (40245) and within 5-6 miles of my current house there are at least 4 brand new (started in 2020-present) single family home communities that have been constructed by builders like Fischer Homes, Ball Homes, Pulte, etc. They will probably continue building new homes for another year or two in these neighborhoods. Curious how all of this continual new construction affects the rental market in this area if at all? 

I bought one of these sfh as my first house back in 2020 with a 2.5% 30yr conventional mortgage. On paper, I have ~$50k in equity in this house but don't plan to pull any out and given the rate I plan to hold indefinitely. With all of that said, I want to buy my first SFH investment property this year. I'm considering a couple of different options, would love to hear thoughts if anyone else has been in a similar situation in their market.

Option 1: stay in my current house and buy a sfh outside of this ~10 mile radius where new construction isn't as heavily saturated but still growing in population.

Option 2: turn my current house into a STR to try to take advantage of the golf course tournament travelers, etc. OR LTR and cash flow >$200/mo. AND design (buy) another new construction home in a higher priced neighborhood, taking advantage of the 5-10% down primary mortgage, rate buy-down and paid upgrades (granite, flooring upgrades, etc) offers from the seller. Then potentially rinse and repeat after 2 more years... refinance somewhere along the way if rates come down again...

[Jake Guhy]

@Tyler Neison I've looked into new construction STR options out in East Louisville (Valhalla/Polo Fields areas) & struggle to make the numbers make sense (due to lack of demand) vs MTR/LTR. With option 2, the low DP, primary rates, and potential to eliminate capital gains by living there 2 years (if you for some reason choose to sell) are all big advantages.

Though, you can likely get stronger cash flow, appreciation, and STR potential by buying closer into town, especially with a little bit of value-add.

Happy to chat more and see if there is any way I can help!