Buy New Home as investment property?

Question

I have a new home community being built near me in Duluth GA.  The community is in the early build stage and there are not a lot of homes currently built.

My question is would you purchase a NEWLY BUILT property as a real estate investment?  I would want to rent out this property.

My thoughts are that the property will increase in value as the community continues to build out.  *** Note I'm new to the real estate investment path and welcome your feedback.

Kristin Kiddy · Answer

@Bruce Lynn is correct, many new home communities require buyers to be owner occupants in order to take advantage of builder incentives.  A work around is to make it you primary for a few years and then rent it out.  I've not heard of an HOA completely banning rentals in a single family community, although they can require registration and background checks of renters.   In Florida, homes built before 2005 have higher insurance rates than an new or almost new build and that can really affect return.  Add to that the desirability of renting a new home (which would allow a maximized rental rate), I would definitely look into the opportunity.

Caleb Brown · Answer

The good thing is they'll appreciate and you'll always have a renter. Also they'll be turn key so low maintenance(unless the build quality stinks). But most new build communities don't allow rentals. Certain townhomes will but double check that. They don't cash flow well out the gate. If it works for your model then do it but run numbers and do due diligence

Bruce Lynn · Answer

You might check with the builder and see if they will sell to investors.  Many don't.

If there is an HOA, you should check to see if they allow rentals and signs.  Many don't.

New homes are right for some investors, but many won't touch new homes.  The returns are normally as good as say a 10-20 year old home in many cases.  There's often an option to value add for older properties, that allow you equity capture.

Another consideration at this point in time is interest rates.  If you take on a build job interest rates will likely be higher when you close at some point in the future, vs being able to lock that in today.  That can impact your returns significantly.

Michael Bergeron · Answer

Thank you both for your feedback.  I went to the sales office and asked about being able to purchase the home as a rental and they said that they do allow this, but only 10% of the community can be rentals and at their current build out they are at there current rental allotment rate.  Phase 2 will open up more rentals for investors.   However, your information will now allow me to ask the right questions sooner and hopefully I can be part of that 10%.  Thank you Mike

Buy New Home as investment property?

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