Purchasing a New Vs Used Rental Property

If you’re buying a home to live in for a while, it makes sense to purchase property that feels right to you: a home in the neighborhood you prefer, a home with the charm or vibrancy you’re looking for and a home that is easy on your eyes. However, if you’re buying a property for investment reasons, such as renting it out, the picture gets blurrier. Here are considerations to weigh when deciding to invest in a new property versus an older property.

When you’re investing in a property with an eye on renting it out, you want to be proactive in keeping your maintenance bills as low as possible. Not only does this save you headaches and money, it helps your tenants, too. In general, older homes mean older construction and older fixtures—and more maintenance.
The exception to this, of course, is if you buy an older home for a dirt-cheap price and renovate it so its innards are new. Doing this could save you significant money.

Price and Community
Buying a new home often costs more than buying a used home, although this isn’t necessarily the case across the board. Expect to pay 15 to 30 percent more for a newer home than its older counterpart, and if you’re comparing properties, look at what you’re getting for the price. For instance, an older home may come with a larger yard and more shade, while a newer home is built on a smaller lot but has the latest technology inside. Consider the community at large as well. College students look for certain things married couples with kids don’t, and the same goes for single professionals. You could buy a newer home that has everything, but if the community in general prefers proximity to work as well a unique look, large yards and charm that some newer homes lack, your purchase could end up costing you.
Look at the rental market in the community. Are the majority of rental homes older properties? What do newer rental properties look like? What can you make work?

Long-Term Picture
Is it possible you’d want to live in the home you intend to rent out at any point? For instance, after retirement? If so, give more consideration to buying a home that matches your preferences regardless of its age. Also keep in mind that a new home now won’t be as new by the time you move in. Let similar factors guide you if you’re thinking about buying a home for your heirs to live in at some point.
Also consider resale values. Location, age, condition, size and layout affect resale, and in general, a newer home brings a higher resale value.

Due Diligence
Follow due diligence when evaluating new and older properties. Even new construction can be shoddy with cracked foundations. Never assume anything.
The bottom line is that there’s no black and white answer. Some older properties are smart investments, as are many newer properties. Factor in the demand and preferences of the community where you plan to rent out your property and how long you might keep it. Look at costs as a whole; don't focus just on selling price. For example, buying an old home and renovating it could be much cheaper than buying a brand-new house.


POSTED September 17 2015 9:16 AM

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