New versus Old - is it worth the price?

One of the most unpredictable expenses in the rental property realm is maintenance and repair. The best we can do is budget for what we expect is a reasonable allotment of monthly income and keep it available to pay for these expense when they arise. One of the biggest factors that can affect how much we will spend on repairs and maintenance is the age of the home. As with any product on the marketplace, a new (or newer) home will command some sort of premium over an older property. However, in some instances, this premium may be worth it when factoring in the decreased maintenance expenses. 

A robust rehab of an older home should limit the larger maintenance expenses in the same way as a newer home would have decreased expenses. Essentially, the biggest risk would be doing only a partial rehab on an older home. Though it may cost less money upfront the damage can be two-fold. First, and more importantly, you are presenting an inferior product that will only reflect on your personal brand. Secondly, the increased maintenance costs will likely more than make up for the decreased up front costs. 

Brand (or relatively) new homes will have significant life left on roofs, air conditioners, water heaters, and windows. Despite a longer life on the CapEx items, general maintenance issues will likely occur less often as well. Sinks won't stop up as quickly, flooring will last a little longer, the fresh paint will have some years on them and doors won't be as drafty. 

What is that break-even point? It is tough to say on a broad basis - but it could be as much as a 5-7% of rents per month difference between owning a new home and a 40-50 year old home! It comes down to recognizing the difference and pricing it into the original underwriting and offer price!