Buying New vs. Old. Finding a Hassle Free Investment Property

[Rod Zahavi]

When investing in real estate one of the key factors to consider carefully is the age of the property. Prices on older stock may be tempting, but going with a new investment property has many important advantages. In this educational article we will review key benefits of investing in newer properties.

NEW PROPERTIES OFFER LOW MAINTENANCE COST

With a brand-new property the maintenance and repair costs will be low because all of the wear items (furnace, water heater, laundry, kitchen appliances, roof, etc.) are new and will have years of life before needing to be replaced. Most states also require the builder to provide a home warranty, as well. In Texas, where Better Coast Capital does most of our investing, homes come with a 10-year builder’s warranty which cover many important elements.

Another other maintenance related advantage that is less jonoobviou is your ability as an investor to project your expenses. With a new property you can much more easily plan for repairs and updates, allowing you to better manage cash flow. Maintenance and repairs don’t only cost money, they take time and can be frustrating when dealing with a tenant’s schedule. For example, to have a refrigerator replaced may require that the appliance is delivered and installed by a plumber. Someone will have to coordinate with the tenant and the tradesmen to get access to the property for at least a day. Buying a new property will help avoid these problems.

POTENTIAL FOR APPRECIATION IN NEW INVESTMENT PROPERTIES

When buying a new home in a new subdivision, or in an existing subdivision that is being augmented, the potential for rapid appreciation is greater than an older property in an established neighborhood. This is due to the accompanying upswing and face lift that new construction creates. Once the new subdivision is built and the construction of other homes is complete, it’s common to see rapid appreciation that is significantly higher than that of pre-existing homes in the same market. With careful research to make sure you are buying in the right place at the right price, you can take advantage of this appreciation boost when purchasing in a new neighborhood.

NEW PROPERTIES OFFER MORE LIQUIDITY

New properties simply sell faster than older properties. This increased liquidity is hard to over emphasize because it adds value to your investment and provides you with better flexibility, especially when the market is taking a turn.

RENTAL PREMIUM

The vast majority of renters would prefer a newer home. This preference is translated directly into a premium rental rate, as compared with a similar size and type of home that is older. Further, recent advancements in insolation, heating systems, and window materials have greatly improved the energy efficiency of new homes compared to homes built 15 or more years ago. Tenants today are informed of these advantages and the significant savings of having an energy efficient home. This further supports the premium rental rate an owner can charge on a new home.

NEW PROPERTIES RENT QUICKLY

A simple truth of real estate investing is that a rental home must be rented in order to produce income. New homes have an advantage here, too. They rent quick, really quick. Every month your rental home sits empty takes away 8.33% of your income. A new rental property will be easier to keep rented, keeping your investment in the black.

EASIER TO LOAN AGAINST

We can’t emphasize this enough. The age of your home plays a factor in the ease of obtaining mortgages. This is extremely important for every investor. More lenders who will happily lend on your home means more competition, which means better terms and more choices of lender. Having options becomes key in times where market conditions change, or interest rates become more attractive for refinance.

SPEND LESS ON INSURANCE

Updated fire, safety, and building code requirements that new homes must meet makes them less risky, and less expensive to insure.

HASSLE FREE INVESTMENT PROPERTY

The new home will require less of your time making it ideal for the passive investor who wants to enjoy income and property value growth with peace of mind. The hassle-free nature of newer properties allows investors to choose remote properties based on market conditions, rather than selecting based on ability to oversee maintenance on the investment.

INVEST IN RENTAL PROPERTY WITH BETTER COAST CAPITAL

Better Coast Capital has been helping our clients select investment properties for years. Our philosophy, vetted investment opportunities, means we focus our efforts in locations and segments that have historically provided stability, and are currently undergoing above average economic and demographic growth. Through our network of accomplished business partners and the volume of transactions, our clients are able to leverage price efficiencies and savings, while at the same time enjoying an unmatched personal level of service. This combination is key to our clients achieving ongoing success in income and wealth creation via vetted US real estate assets.