While most real estate investors buy used properties to use as rental properties, some have bought and been successful with new construction properties as rentals as well. It’s typically more difficult to get a good deal on new construction properties, but that isn’t to say that you can’t or that you won’t be able to generate a positive cash flow with one.
If you’ve wondered about purchasing a new construction and using it as a rental property, keep reading as we discuss four reasons why new construction properties are good investments.
1. Lower Maintenance Costs
An obvious advantage to buying a new construction property is the fact that it will require little if any, maintenance. While most investors must spend money to fix up a rental property before they can rent it out, renting out a new construction property can happen as soon as construction is complete.
It’s true you’ll spend more upfront for the property itself, but overall, you’ll pay almost nothing in maintenance costs and you’ll begin generating a positive cash flow much faster than if you purchase an older rental property that needs work.
2. Better Locations
Every investor knows that location is key when it comes to owning rental property. When you purchase a new construction property, it’s almost always located in a nice, up-and-coming neighborhood with low crime rates and plenty of attractive amenities close by.
These neighborhoods tend to attract the kind of tenants landlords dream of. They mow their lawns regularly, don’t collect vehicles in their front yards, don’t throw loud parties, and pay their rent consistently and on time each month.
New construction properties often carry builder warranties that guarantee their work for at least a year. Some builders include warranties on certain things for up to ten years. As such, you’ll not need to waste time chasing a bevy of contractors to make repairs. If something breaks during the warranty period, it’s the builder’s problem – not yours.
Furthermore, all the appliances in a new construction are brand new. This means you won’t be answering emergency maintenance calls in the middle of the night. That, in and of itself, is a great reason to consider investing in a new construction property.
4. Cut Costs Upfront
It’s tempting to add a bunch of fun and attractive amenities during the building of your new rental property, but you can cut a great deal off the top by sticking to the basics. For instance, go with a simple bathtub rather than the jetted one, and install a regular refrigerator instead of a high-end one with all the bells and whistles. Keeping things simple can save you as much as $40,000 off the price of the home, which will give you better equity right from the start.
As a general rule, most real estate investors purchase older homes as rental properties because it’s easier to get a good deal that will ultimately generate a bigger ROI. Having said that, the four reasons above are great arguments for at least considering new construction properties as good investments.