Are new construction rental properties a good investment opportunity? That’s a question that many people are asking these days. The answer, of course, depends on a variety of factors. But in general, buying and renting newly-built properties can be a great investment, if you do your homework and plan accordingly.
The Real Estate Investment Coaches at MY SMART COUSIN are here to help you make your investment in new construction a success. At MY SMART COUSIN, we have the skills and expertise that can position aspiring homeowners and investors, and especially Black and Brown folks and women, to succeed in this competitive market and score one of the most elusive of all finds, a house for the price of a car. New investors will benefit from working with us and our approach of developing a customized plan, tailored just for you.
If you’re like most people, you’ve been giving some thought for a while to investing in rental properties. And if you’re considering new construction properties, you may be wondering how they compare to investing in existing real estate stock. In this blog post, we’ll take a look at some of the pros and cons of purchasing new construction rentals. We’ll also help you decide if this type of investment is right for you. So, let’s get started!
WHAT ARE NEW CONSTRUCTION RENTAL PROPERTIES AND HOW DO THEY WORK?
New construction rental properties can be a great option for marketing to those tenants who are looking for a brand new place to live with all the bells and whistles, and a price to match. Often, these rentals come with amenities ranging from a dog park, to exercise and meditation areas, to on-site childcare and recreation facilities. Since the units are newly-built and often outfitted with high-end appliances and fixtures, there are usually no maintenance issues for you to address in the first couple of years.
But how do new construction rentals work? Typically, when you buy a new construction unit, you’ll lease it to a tenant for a set period, usually one to two years. At the end of the lease period, you’ll decide if you’ll offer the tenant any incentives to renew, such as one month free, or a 30-60 days deferral on when rent increases will take place. The amount and type of incentives you offer will depend on what’s being offered in the market, as well as how much or how little rental inventory is available in the building and surrounding area. Many new construction rental properties offer flexible leasing options, so as the landlord of a condo that you’ve purchased and are leasing to a tenant, you can determine if you would like to offer a lease that’s less cookie cutter, perhaps 15 months, if this works best for a great tenant who needs to move due to a work relocation, for instance.
WHAT ARE THE BENEFITS OF BUYING A NEW CONSTRUCTION PROPERTY TO RENT VERSUS AN OLDER PROPERTY?
There are a few key benefits that new construction rental properties have over older ones.
· First, newer buildings are built to present-day code requirements, which are often stricter than those in years past. This means that such buildings are typically safer and more structurally sound than older properties.
· Additionally, newer buildings often have better energy efficiency ratings, due to efficient heating and cooling systems, insulated windows and doors, and the like, which can save tenants money on their utility bills as well as meet the objectives of tenants who are seeking a green-energy/low-carbon home. Newer buildings might also have faster and more wide-ranging broadband services, allowing for a better technology-enabled living experience.
· Finally, new construction rental properties usually have a modern and sleek aesthetic, which can be attractive to high-paying renters.
All of these factors make new construction rental properties a great option for landlords and tenants alike.
ARE THERE ANY DRAWBACKS TO INVESTING IN NEW CONSTRUCTION RENTALS?
There are a few potential downsides to investing in new construction rentals.
· One is that the property might come with high maintenance fees to pay for high-cost and more expansive common areas, on-site pool, and tennis facilities, for instance. One way to offset these costs is to seek out properties that were built with tax credits, and offer savings on property taxes or other rebates.
· Another downside is that new construction can have a lower charm factor due to few historical architectural features, ruling out some tenants who might otherwise be interested.
· New properties often cost more per square foot than older properties, leading to a lower return on investment and a longer breakeven timeframe.
· Additionally, new construction can be subject to unexpected construction delays, leading them to take longer to complete than a property that simply needs a few finishing touches to upgrade it. Construction delays can lead to unforeseen higher costs in addition to delaying when you start earning rental income.
Ultimately, whether investing in new construction is right for you depends on your target rental market and goals.
WHAT IS THE BEST WAY TO FIND NEW CONSTRUCTION RENTAL PROPERTIES IN YOUR AREA?
There are a few ways you can go about finding new construction rental properties in your area.
· One option is to drive around and look for signs advertising new developments. Dial into county zoning meetings and look for infrastructural projects such as new roads or sewer improvements as an early indicator of planned developments.
· Another option is to search online listings or contact a real estate agent who specializes in new construction. When searching online, you can use keywords like “new construction” or “new developments” to help you find relevant listings.
· Once you’ve found a few potential properties, you can then contact the property manager to schedule a showing.
· Finally, when touring the property, be sure to ask questions about what a property like this would rent for, whether there are any restrictions that would apply to owners who plan to rent their property, and any other important details.
By doing your research and asking the right questions, you can find the perfect new construction rental property for your needs.
HOW DO YOU KNOW IF A PARTICULAR NEW CONSTRUCTION RENTAL PROPERTY IS A GOOD INVESTMENT OPPORTUNITY?
There are a few key things you should look for when considering whether a new construction rental property is a good investment.
First, you’ll want to research the surrounding neighborhood to get an idea of the local market conditions. Are rents and inventory in the area rising or falling? What is the average vacancy rate and turnover rate? Is there new construction along with retail and hip restaurants popping up all around? These are all important factors to consider.
Once you have a good understanding of the market, you’ll want to take a close look at the property itself. Is it well-built and well-maintained? Does it have any unique features or amenities that will appeal to high-end tenants such as refrigeration for grocery deliveries? Is it located in a safe and convenient area? If you can answer yes to these questions, then there’s a good chance that the property will be a successful rental.
SUMMING IT UP
So, are new construction rental properties a good investment opportunity? In short, they can be – but it’s important to do your homework first. We hope this article has given you a better understanding of what new construction rentals are and how they work, as well as some of the benefits and drawbacks associated with them. If you’re ready to invest in a property like this, contact us to help you evaluate your potential investment. Happy hunting!
YOU CAN ALSO READ: THE BENEFITS OF INVESTING IN REAL ESTATE
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