Should You Buy a Newly Built Home for an Investment Property?

If you’ve been in the real estate business for a while, you may start to consider switching up your investment strategy. For instance, if your main strategy is buying fix and flip properties, consider buying a newly built property to rent out. That said, there are a few pros and cons to consider when you buy a newly built home. So, read along as we review them and how to find financing for your newly built investment property. 

Contents of This Article: 

• Why Buy a Newly Built Home?
• Does a Newly Built Home Make a Good Rental Property?
• Pros and Cons of Buying a Newly Built Property
• Find a Local Lender for Your Next Investment

Why Buy a Newly Built Home?

Rental property investors may not consider a newly built home when they make their next purchase. However, private money financing a newly constructed residential, mixed-use, or commercial property can be an excellent strategy. 

There are several reasons why investors like new construction properties. After all, you get a fresh start with brand-new materials and appliances. In addition, when you buy an older home, you may have to work on it or maintain it more regularly. However, everything in the newly built home is immaculate, meaning you likely won’t have any major repairs to take care of in the near future. 

Additionally, when you buy a newly built home, you can customize it how you want. For instance, you can generally choose the paint colors, flooring, appliances, and more. These days, it’s hard to find exactly what you’re looking for in a rental home. So, customizing it how you want is an excellent feature of a new build. 

Buying a newly built home for your next rental investment is an excellent strategy if you want less maintenance and higher returns. Read along while we discuss why newer builds make great investments. 

Does a Newly Built Home Make a Good Rental Property?

If you’ve been in the rental business for a while now, you know that renting out an older, outdated property can be challenging. After all, many renters these days are looking for modern, updated spaces to live in. Additionally, you may have more maintenance concerns or worry about the structural integrity of older buildings. 

On the other hand, if you have a new build, you’ll likely have no trouble advertising it to the right tenants. You also have less to worry about regarding maintenance and home repairs. However, there are a few challenges. For instance, finding tenants that will care for the property is crucial. After all, you don’t want your first tenants to cause any damage or destruction that affects the property’s value. As such, a thorough tenant screening process is an absolute must for a newly built property (or any property, for that matter). 

Buying a newly built home for an investment property is an excellent strategy if you do the proper research beforehand. For instance, finding financing that works best for you is essential, whether a traditional mortgage loan or private money financing. 

Additionally, you’ll want to work with the home builders to ensure the property is just what you want. For instance, ask about any warranties they offer, research their past work, and ensure the property is just what you’re looking for before buying it. 

Pros and Cons of Buying a Newly Built Property

Although buying a new build rental property seems ideal, no investment strategy comes without pros and cons. Therefore, carefully researching this investment method is crucial for anyone considering it. So, if you’re wondering what’s great about buying newly built properties and what could go wrong, here are some of the main pros and cons. 

Benefits of Buying a Newly Built Home

• Energy Efficient- Newer homes with modern designs and appliances are often much more energy efficient than older homes. As a result, you save money on energy costs over time. Additionally, most people are willing to pay more for a more energy-efficient rental, especially if they’re paying for utilities.
• Lower Maintenance- When everything throughout the property is brand-new, you can feel more peace of mind. There’s no fixing up necessary, fewer maintenance concerns, and less to worry about overall.
• Brand New Home- One of the largest benefits for you and your rental tenants is the fact that everything is brand new. You can use this appealing factor to draw in high-quality tenants, as they’ll appreciate being the first ones to live in the new build.

Disadvantages of a Newly Built Home

• Long Buying Process- If you secure the property while it’s still being built, there’s a chance that things won’t go to plan. There could be delays, shortages, or other issues. As such, if you’re trying to make the buying process quick, buying a new construction property could be difficult.
• Harder to Negotiate- It’s harder to negotiate the price of a newly built property. Most homes on the market are priced by the previous owner based on market value, so there’s more room for negotiation. However, newly built homes are priced differently, usually by the builders, who don’t typically negotiate.
• Uncertainty- With new construction builds, there’s a bit of uncertainty. Older rental properties have an extensive history for investors to research potential cash flow. However, you don’t know what the newer property’s taxes will be or the potential cash flow.

Tips for Investing in a Newly Built Property

Investing in new construction has its pros and cons. As such, as you navigate the buying process, there are several tips to keep in mind. Here’s what to consider if you plan to buy a newly built home for your next investment. 

1. Research- It’s crucial to research the community and the demand for new rental properties. Additionally, you’ll want to look for new properties in up-and-coming locations.
2. Shop Around- Consider all your options before choosing a hard money lender. After all, one lender may offer you better terms than another.
3. Negotiate- If you want the best offer on your newly built property, negotiate with the developers. While they may not drop their price, they may be willing to cover some of the closing costs or better amenities at no additional fee.
4. Find an Agent- If you’re looking to buy a newly built home, work with a real estate agent that’s experienced with new builds. That way, they can help you navigate the process seamlessly.
5. Get a Guarantee- If you’re looking to buy a property that’s not fully finished yet, get a guarantee from the builders. Add details of when the property will be finished and quality requirements within your guarantee.

Find a Local Lender for Your Next Investment

If you’re looking to buy a newly built home for an investment property, you’ll want to find a trustworthy lender. Additionally, if you’re trying to invest immediately, finding a lending company that works quickly to get the funds you need is crucial. Luckily, Maryland Hard Money Lenders can help fund your investment within just a few days.

If you’re looking for a reputable lender near you, contact Maryland Hard Money Lenders. Our professionals work with all types of investors to bring their investment goals to life. So whether you’re looking to invest in a fix-and-flip property, new construction, or rental property, we can help! Fill out a loan application and learn how we can help you today.