Older Versus Newer Homes: Which Make Better Rental Properties?
Within the world of single-family rental properties, there is, in fact, quite a range of investment options. Investors may debate the benefits of long-term versus short-term rentals, those that are lower or higher-priced, and of course, whether it is better to buy an older or newer home for a rental property. While there is rarely one single best option for all markets and investment styles, there are clear pros and cons to buying older properties for rental homes, as there are for buying newer properties.
In what follows, we’ll look at some of the benefits and drawbacks of each, information that can help you to make the right choice for your area and abilities.
Older Rental Properties
There are some clear benefits to buying older homes as single-family rental properties. Perhaps the most obvious benefit is location; older homes are often found in neighborhoods closer to the city center and all of the amenities of downtown. Because they are in established neighborhoods, the market rates tend to be more predictable, making determining rental rates a bit easier.
Another benefit is that older properties may feature higher quality construction and materials. While this is certainly not true in every case, more often than not older homes might come with bigger yards and more space between the houses. On the other hand, older rental properties may need a lot more work upfront than a newer home does. Many have not been updated in quite some time or may not come equipped for modern technologies; they may also require code compliance updates that can be expensive.
While the location may be a big draw, some older areas may experience a decline in market values due to shifting amenities or the general neglect of neighboring properties. These are all things to keep in mind when choosing to buy an older property.
Newer Rental Properties
In contrast to older homes, newer single-family properties offer several compelling reasons to consider them as rental homes. For example, newer homes tend to appeal to residents looking for longer lease terms and upgraded neighborhoods. Other benefits of buying newer properties include higher energy efficiency and lower capital expenditures, making early cash flows more predictable. Of course, the future isn’t certain there is always an element of risk and unpredictability when buying new homes. There is also a real risk of poor-quality construction as builders are rushing to meet demand, as well as squeezing more homes onto smaller lots to increase their profits.
All of these factors and more must be taken into consideration when choosing any property for a rental home. Given the complex nature of such choices, it makes sense to seek out any available resource that makes the decision easier.
The good news is, the professionals at Real Property Management will give you a property evaluation on a home before you buy, showing you the potential rent and other factors that can make choosing your next rental property an informed decision. Contact your nearest Real Property Management office for more information.