Is Buying a Brand New Rental Property a Good Idea?

Modern street of typical middle class desert homes near Las Vegas Nevada.

With a shortage of inventory in the Las Vegas real estate market, more and more owners are turning to brand new properties to invest in. Of course, the difference is price. On average, brand new homes in Las Vegas have a median sales price of nearly $100K over existing inventory. So, is it worth the investment?

Here are the pros of brand new:

1. A brand new home means everything is brand new! Electrical, Plumbing, HVAC and Appliances should be in prime condition to last a number of years. Maintenance costs are reduced typically the first few years of ownership.

2. Rents for brand new properties tend to average higher compared to an existing home with comparable size and amenities – on average by 5-10%.

The cons of brand new:

1. Initial investment is typically higher since brand new properties tend to cost more than a comparable resale property.

2. Construction in a neighborhood can be a negative aspect to a potential tenant.

However, many homeowners have been able to purchase a brand new home and generate handsome rent to cover their monthly expenses. Planning is needed to research brand new communities and calculate potential rental income. Another big factor is financing. If you plan on carrying a mortgage, how much will you put as a down payment? The less of a down payment, the higher the monthly payment. And a down payment of less than 20% means Private Mortgage Insurance, which adds to the total payment due each month. And don’t forget the vacancy factor. Periodically, a vacancy will occur with no rent generated. Will you be able to satisfy the necessary mortgage payment.

Of course, if purchasing cash, monthly expenses will be limited to insurance, property taxes and HOA dues. While the return on investment calculation may be less than desired in certain cases, will owning a brand new property give you peace of mind, knowing that major maintenance should not be an issue for a while?

So, when all is said and done, a brand new property can mean less maintenance expenses and more peace of mind in that regard. However, it also means a higher investment. A resale property may be priced lower but also harder to come by. Repairs and other maintenance costs may need to be factored in as well.

So, the decision is ultimately yours. Take time to research and talk to the experts to help you make the best decision possible.