Buy new construction for rental - More defined CapEx, namely Zero
Obviously when one buys a property to rent, the expenses need to be estimated and accounted for. Is there a flaw to the logic of buying new construction to "control" the costs.
Buy new construction on a 10, 12, 15 year plan. Exit strategy is to sell at the end of said period and buy another new construction at that time.
Obviously, one should have ample cash reserves as anything can (and will) happen, but literally budget Zero for CapEx.
Additionally, one should be able to budget a relatively smaller monthly / annual amount for repairs and deferred maintenance.
My real experience closely mirrors this.
We built a house ($155K in A/B+ Dayton, OH area) in 1997. Settlers Walk for those that know the area. Moved in 1999 and used it as a landlord by default rental.
We did several things wrong, particularly with 1 bad tenant over a 2 year or so period. Even with that, we really only lost rent revenue and had very little expenses.
Rental period = 13 years , 9 months
Rent collected = $194,718 Rent should have been $210,750 The deficit was poor management, not vacancy. But I will count that as 7.6% vacancy.
Repair and Maintenance = $8933 = $54/mo = $700/yr = 4.2% of expected rent
NO Capital Expenditure.
So.... Am I flawed here? Why cannot I assume a similar Proforma on a new construction rental.
Additionally, lower maintenance costs means lower hassle, call outs, etc.
I'm looking to buy at $300K and rent for $2200 - $2500.
Questions, comments, boos, anything else?
Thanks in advance, Rob