New construction duplexes

[Jeff Ostrander]

I am a new investor with an interest in multi family and  an acquaintance of mine pitched me a 3 duplex deal that has yet to be built. The cap rate is around 9% with the rent/purchase price at 0.95%. 

Is evaluating a new construction deal the same as an existing structure? Those numbers include maintenance and cap-ex but it seems to me that they’d be negligible the first few years of owning the property. 5 years down the road when I need to spend some money on repairs, the appraised value and rents of the property will be higher, essentially increasing rent/PP to above 1%. 

Any other considerations when looking at buy/hold new construction that may be different than older rentals?

Thanks!

Jeff

[Bryan Noth]

That sounds pretty solid then.  I am not keen on tenant placement by a builder, but that’s your call.  Huge pro is immediate cash flow.  Potential con is that you have to honor the signed lease and it’s terms.  This can be scary, a few of the leases we inherited with purchases were wrought with issues.  The day when our property manager has them sign new leases at renewal is a relief to me. 

I like the B to B- neighborhoods. Those renters will always be around even if the economy or market turns down.  

Lastly, Keep an eye on the purchase or intent to purchase agreement they have you sign to make sure you are not on the hook for anything outlandish. 

Best of luck and let us all know what happens, this is exciting.