In real estate, there has been a long-standing debate on whether or not old properties or new properties are “better” in terms of their profit and potential. And while there are pros and cons to each, as a real estate investor, it’s understandable that you’d want to put your money into the more lucrative option. Older properties are cheaper, but the costs may be proportionate to what you would otherwise spend on a brand-new property. On the other hand, newer properties are pricier, but they tend to be more “rent-ready”.
This article will outline the pros and cons of each, and provide you with valuable information that can help you decide what’s the ideal choice for you.
Pros and Cons of Older Rental Properties
#1 They tend to be in established areas.
One of the pros of older properties is that they’re probably located in an established area that’s close to the city center. Decades ago, their homeowners were able to buy the lots for a fraction of what they cost now. Fast-forward to today, and they’ve skyrocketed in value. Since they’re in established areas, it’s easier to determine the rental rates. If you want to be certain of its profitability, you can ask your luxury homes management agent to check that particular rental market’s trend.
#2 They attract a particular tenant pool.
Because they’re in established areas that are near the city, they attract tenants that want downtown amenities. This includes professionals that want to be closer to work, or that want to experience what it’s like to live in an immensely urban environment.
#3 They’re probably built better.
It is more probable for an older home to be built with better materials than a newer home. While it’s true that old homes deteriorate over time, it’s also undeniable that decades ago, contractors didn’t have to cut corners. In other words, they were able to build homes with durable materials that continue to meet today’s construction codes.
#4 They’re probably built on bigger lots.
You don’t need to be in real estate to understand that land is in demand. Since the house was built decades ago, it’s probably on a big lot that, at that time, wasn’t too pricey. And while it will cost you more to purchase it, it does come with more room to construct an entirely new home, if that’s what you intend to do. You could even construct a tiny home and turn it into a vacation rental!
The drawback of older homes is that they likely need a lot of repairs. The least you’ll have to deal with is the wiring, however, there’s a good chance that you’ll have to renovate the entire structure, too. This is an expense that you need to consider, especially since construction costs in certain markets can be extremely expensive.
Here are some of the structural issues to note:
- Gutter works. Water can penetrate the structure, causing issues including mold growth.
- Homes built in the 70s contain asbestos on the walls, which you will have to remove as asbestos exposure can be toxic.
- Electrical works. It’s unlikely for an older home’s electrical works to be up-to-date. Your rental is required to meet the electrical code, so partner with a property management company that can help you find a qualified electrician.
Pros and Cons of Newer Rental Properties
#1 They’re more attractive to tenants.
Tenants love rental units that have modern amenities such as smart appliances, smart security systems, and more. If your property has these, they’ll be more than happy to pay a premium. They’d rather pay more for a property that’s rent-ready than have to invest in multiple appliances, devices, etc. that they won’t be able to bring with them when they move out. This applies particularly to short-term or transient tenants.
#2 They’re low-maintenance.
Modern homes come with modern appliances that likely come with a warranty. If a washing machine, refrigerator, etc. breaks down, you won’t have to replace it out-of-pocket. Plus, many modern homes have been built with tenants in mind – in other words, they’re made of low-maintenance materials.
#3 They’re more energy-efficient.
Today’s tenants want to save on their energy usage. Newer properties come with smart appliances, like smart or Wi-Fi thermostats, that work alongside your tenant’s steps to lower their energy bills. This attracts a particular pool of eco-conscious tenants.
#4 They’re near top-rated schools.
Newer homes are constructed in communities that are near top-rated schools. They’re attractive prospects to tenants that want to enroll their children in the country’s top institutions. And since tenants tend to be reluctant to change their kid’s schools, they’re more likely to become long-term tenants. At the very least, they’ll stay until their child completes high school. In other words, you’ll have fewer vacancies.
#1 They’re expensive.
It’s no secret that newer homes cost more. This is because developers factor in the costs to advertise the property, too. Another factor that can cause the price of new homes to skyrocket is the demand – since there are fewer homes on the market, developers will take advantage of this and sell their properties at a premium price. Hence, if you want to purchase a new property for a lower price, you may want to partner with a property management firm.
#2 They’re constructed on limited land.
Land is expensive. That is why newer homes tend to be constructed on small pieces of land. If you were thinking about building a deck or pool in the backyard, that may be impossible. When buying a new home to rent out, remember that you may not be able to change it entirely, considering today’s cost of materials and construction.
The Bottom Line
In sum, older homes are cheaper, but they can cost more if they need a lot of work. Meanwhile, newer homes cost more, but they tend to be rent-ready, and can therefore help you avoid a vacancy.
Whether you’re looking for an old property to flip, or a new property to rent out now, the experts at Luxury Property Care can help you look for potential properties. Having been in the business for years, we’ve established a wide network of realtors, real estate agents, etc. who can help us look for the perfect property for you.