Are New Construction Homes a Good Investment For Landlords

If you are looking to invest in rental properties, you may wonder if new construction homes are a good option. Particularly in Las Vegas, Henderson, and other fast-growing cities in the U.S., new construction is booming and makes up a large portion of homes on the market.

So, is it worth it to purchase a new construction home if your goal is to generate rental income? Our Henderson and Las Vegas property management team shares some insight.

What Is a New Construction Home?

New construction homes are typically built by a developer or homebuilders in a planned community. The home is constructed from the ground up, and the buyer is the first person to own it. Although most new construction homes share similar looks and aesthetics because they are built using the same materials, buyers have some say in how they want them to look, the floorplan, and custom details.

What Are the Benefits of Landlords Investing in a New Construction Home?

When considering a new construction home as a rental investment, property owners/landlords have several benefits to think about. Some of those include:

1. Good Locations

While the specific location of the new home within its neighborhood may be good, it is more about the overall desirability of the broader market. New homes are being built in upcoming areas that are rapidly growing due to more and more people wanting to live there. This is a benefit for landlords because it gives you more security knowing there is a demand for housing.

2. People Prefer to Live in Newer Homes

Many renters are attracted to the idea of living in a home in which few tenants have occupied. It is hard to feel at home when there are remnants of past occupants in the space. Even when you do get new tenants after the first one, your newer home will still be cleaner and more modern than other older options on the market.

3. Build Equity Quickly

Again, investing in real estate in an growing market is generally a good idea for landlords or property owners. Another reason for this is the price of homes typically goes up in a market with high demand, allowing you to build equity quickly from your new home purchase.

4. Ability to Customize the Home

Another perk of purchasing a new construction home is the ability to customize the home in a way that appeals to renters and cuts costs for you. For example, you can choose to go with more durable materials in some instances but opt for basic features over the more expensive luxury choices.

5. Neighborhood Amenities

New construction neighborhoods are built with the community in mind. That means you will often have convenient amenities right where you need them, such as:

  • Parks
  • Walking trails
  • Areas for entertaining
  • Community pool
  • Clubhouse

Additionally, the areas around the neighborhoods are usually tailored to residential needs and often include grocery stores, restaurants, gyms, and more. These convenient amenities will help you attract more qualified tenants and keep them renting longer.

6. New Homes Are More Energy Efficient

In places like Henderson and Las Vegas, it is helpful to have a more energy-efficient home in this competitive rental market. Offering ways to save energy and money is appealing to many renters. Newer homes often come with energy-saving appliances, improved windows, better insulation, and new HVAC systems that optimally use electricity.

7. Better Warranties and Insurance Policies

When you have brand-new appliances and systems, that means your new home often comes with extended warranties on many (if not all) of them. In addition, you may be offered better insurance policy options on the home because it is newer and does not pose as much of a risk as older properties.

8. Fewer Repairs and Low-Cost Maintenance

Although having a new construction home does not mean you will not have to deal with any repairs or maintenance, the chances of needing a major fix are much lower than a more established home which has been lived in for a while. Not only will this save you money in the long run, but it also means your tenants will be happy that they do not have to continually request repairs.

Are There Disadvantages to New Construction Homes as Investment Properties?

Of course, there are always downsides to consider before purchasing a new construction home as a potential rental property. Here are some of those things:

1. Further Commutes for Renters

Many new construction communities are located a little further away from the action of the city because those areas are already densely populated. Unfortunately, this means longer commutes for some renters. Although there are many potential tenants who do not mind having some distance from that scene, it could be a major drawback for others who work in the busier parts of town.

2. Some Renters Think of New Construction Communities as Generic

Another turnoff for some renters is the idea of living in a “cookie-cutter” community where most streets and homes look almost identical to the next. Many renters prefer the charm or character of older neighborhoods and may be willing to forgo the benefits of a newer home for this reason alone.

3. New Properties Have Some Uncertainty

There is some financial uncertainty that comes with a home that you have never rented out that is located in a brand-new neighborhood where nobody has lived yet. You do not have a firm grasp on what expenses might look like for you or if there could be an overlooked disadvantage to the area that could affect demand.

4. High Demand Means Waiting Lists

When the demand for housing is so high, it often outweighs supply and homebuilders struggle to keep up. If you plan to invest in new construction homes, there may not be any completed properties that could start yielding income for quite some time. Even if you make your earnest deposit, you could be waiting months, or longer, before you can start the rental process and see returns on your investment.

Protect Your Investment with a Property Manager

As a landlord, it is important to weigh these factors and really analyze if it makes sense to invest in a new construction home in your real estate market. Another thing to consider after you make your purchase is how you can maximize on your investment.

Working with a professional property manager can help you avoid rental vacancies, find qualified tenants, and streamline the process to keep that rental income flowing. To learn how we can help you, contact our property management team today!

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