Buy new or older beach house for STR? (Jersey Shore)

[Nick Hawthorne]

Hi all. I'm looking into purchasing a STR beach house on the Jersey Shore that I can use occasionally and rent at least enough to cover the mortgage. I've come across several new construction houses, presumably teardowns. What are the pros and cons of buying a newly constructed house vs. an older one in this area? Also, are there any good resources for investing in the Jersey Shore? Thanks!!

[Anthony DiSanzo]

Hi Nick, I am a Real Estate Broker that works in both Monmouth and Ocean county. The Pros and Cons are normally in regards to the renter you attract. At the Jersey shore I have several clients (investors) who will consistently rent to families for a premium price the same week or two each year. For more beat up homes, this sometimes attracts more of the party crowd who may be slightly harsher on the property and you might be taking a lot of security deposits haha.... I would be happy to help in anyway needed or answer any other questions you have! 

[Sarah Kensinger]

You should first decide your guest avatar and then purchase a property that fits who you want to attract. This little step can help narrow down a lot and you can skip spending months figuring out where or what to purchase.

[Nick Hawthorne]

@Anthony DiSanzo @Sarah Kensinger Thanks for the replies! Ideal renters for me would multigenerational families of means looking to book full weeks in the summer, have a great vacation without wrecking the place, and come back year after year. That would match my own use of the house, which hopefully would be for 2-3 weeks each summer with family and/or friends. For this reason, I am currently looking at larger properties, ideally 4-5+ BRs, in good shape or able to be renovated into great shape.  Thanks! 

[Andrew Steffens]

We have both new construction and renovated properties and there is seemingly a small bump for new construction, but not enough to dissuade me personally from purchasing an older property that is renovated.  Best of luck!

[Michael Baum]

Hey @Nick Hawthorne. So our guests are similar to what you want to attract.

I think it will all come down to price and what you can afford. If you can get a brand new construction for the same price as a 10 year old (or whatever) property that is the same, then that is probably the better deal.

One thing you might get with new construction is in house financing, buy down of interest rates to get you under 6% and other incentives.

Frankly I kinda doubt you will find a brand new place for the same as and existing home. You would have to weigh the extra costs with those possible incentives.

If you find a decent place that needs a bit of sprucing up for 600k and a similar brand new place for $700k then look at the deal. If the builder offers in house financing on the cheap with low down or is willing to kick back 6% to help with buying down points or other incentives, that could make the difference.

[Collin Duffy]

Hey Nick - I've been party to hundreds of STR transactions and there are pros and cons to each. Ultimately it boils down to your knowledge of the market/submarket, but generally speaking newer turnkey assets trade at a premium and you're exchanging lower "return on hassle" for lower CoC. Older assets, usually in need of some work, are a bigger time commitment but leave the opportunity open for you to do some improvements and force value appreciation.

AirDNA and other similar tools online do a great job providing rent comps to drill into the numbers others are seeing (with a grain of salt) on assets in the area. Would be happy to do some due diligence with you as you decide on which direction to go!

[Brooklyn McCarty]

There are pros and cons to each. 

People assume new construction means everything will be perfect. But what that means is that is no one has lived in that house before. You’ll still have kinks you’ll be working out for the first year or so. 

Typically new construction costs more purchase price but your cap ex is basically non existent for the first several years. 

Existing construction can come with a lower purchase price and may require some love, but can also be a better deal sometimes depending on the amount of time and value you are willing to add  

neither is a wrong choice. 

[Colleen F.]

@Nick Hawthorne new or old it's generally about the house and neighborhood. Having grown up in NJ it was always the town that mattered the most. Some towns attracted the college and 2o somethings, some more families. Maybe it's changed but up here you still see differences in areas. Old and new in the same neighborhood layout is probably better in the near house if builder is doing it right but the price per bedroom is likely higher.

[Zach Edelman]

Find your niche, and attack.