Investing in older single-family homes as rental properties can be a great way to expand your portfolio. However, there are several pros and cons to choosing older homes compared to newer ones. Older homes often provide a great location, stable market rates, and more affordable purchase prices.
The downsides to buying an older home, however, include a higher cost of repairs and improvements, lower energy efficiency, and the possibility of missing out on widespread renter appeal. When searching for your next investment property, both the pros and cons should be considered carefully before making any final decisions.
Benefits of Older Rental Homes: Prime Locations and Steady Income
One of the major benefits to buying older homes is their location. Unlike newer homes, which are often located further from social and commercial hubs, older homes are typically situated closer to the heart of the community.
This makes them highly appealing to Millennial renters and seniors who want to be close to amenities. Older properties also offer more predictable rental rates, allowing you to forecast your rental income with greater accuracy.
In many areas, older homes offer the benefit of being more affordable than new construction. This may significantly decrease the upfront cost of the property and give investors power over how much is spent on any improvements or upgrades. Investors can control costs by performing some of the work themselves or by planning projects to maximize cash flow, even though an older home will probably need some repairs.
Real estate investors may also be able to count on better construction and a more traditional floor plan, depending on the age and condition of the home. Certain demographics, especially renters searching for a home with a unique look or feel, may be drawn to these features.
Drawbacks of Older Rental Homes: Costly Updates and Maintenance
Older homes can be appealing to investors all over the country because of these advantages, but there are also some cons. Most of the time, older houses have plumbing, wiring, and heating and cooling systems that aren’t up to date. Additionally, they might have expensive code compliance issues. Older homes often have windows that are less energy efficient than newer homes, which results in higher energy bills and makes it difficult for renters to control the temperature inside the home.
Unlike essential maintenance and repairs, older homes carry the risk of expensive updates and improvements to make the home both safe for occupants and attractive to potential tenants. It’s crucial for investors to have faith in their ability to fund fixes, no matter how big or small, because the higher up-front costs may put a short-term strain on your cash flow.
Assessing Older Homes for Potential Issues
The demographics of the neighborhood may also be a disadvantage of buying an older home. Before buying in a neighborhood, it’s important to gather specific information on a neighborhood and look closely for signs of neglect.
A water main or sewer line upgrade may be necessary in the neighborhood where you choose to live, and these projects typically carry a sizable special assessment or tax to the owner that may be due right away. As the area loses value, property prices may be low, but so may the home’s expected future market value.
Older houses can be great investment properties, but if they are not handled properly, they can also be a drain on the investor’s money. Many old houses have features that newer homes don’t, but they need to be carefully looked at and compared to the market.
At Real Property Management Dominion, we can help investors evaluate and vet potential rental properties and provide detailed information about the home’s neighborhood and the local rental market in Hampton and nearby. We are dedicated to helping real estate investors make the best possible investment decisions. Contact us online or call 757-395-4274 for more information!
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