It can be a profitable strategy to invest in older single-family residences for use as rental property. However, there are numerous pros and cons to choosing older homes over newer ones. Older homes frequently provide a great location, a lower purchase price, and a more stable market rate, for example.
However, there are also downsides to buying an older home, such as a higher cost of repairs and improvements, a decrease in energy efficiency, and the potential to lose 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
Buying older homes to use as rental properties has many advantages. The location is arguably one of the most significant benefits an older home provides. In contrast to many of the finest amenities in the area, which are typically located far away in newer homes, older homes are frequently located within a short distance of desirable social and commercial areas.
A rental home that is conveniently located near the city center or other attractions can be an appealing option for Millennial renters, young professionals, or seniors hoping to enjoy their retirement. Older properties are also present in established neighborhoods, and they are generally associated with more predictable rental rates. One of the most important benefits of buying an older home is the ability to accurately forecast your rental income.
In many areas, older homes offer the benefit of being more affordable than new construction. This can substantially lower the upfront cost of the property and enable investors to manage the amount of money spent on any improvements or upgrades. Investors can control costs by performing some of the work themselves or by scheduling projects to maximize cash flow, even though an older home will likely require some maintenance.
Investors might also be able to rely on higher-quality construction and a more traditional floor plan, depending on the age and condition of the home. Certain demographics, especially renters seeking a home with a unique look or feel, may find these features appealing.
Drawbacks of Older Rental Homes: Costly Updates and Maintenance
There are some disadvantages to older homes, despite the fact that they can be appealing to investors across the country. It’s common for older homes to have water, wiring, and heating and cooling systems that don’t work perfectly. Additionally, they might have expensive code compliance issues. Windows in older homes are often less energy efficient than windows in 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. The higher upfront costs that result may put a short-term strain on your cash flow, making it important for investors to feel confident about funding repairs, big or small.
Assessing Older Homes for Potential Issues
The nature of the neighborhood could be another potential disadvantage of buying an older home. It is critical to get extensive information on a neighborhood before buying there, as well as to look for signs of neglect.
Many times, the region in which the home you choose is due for a water main or sewer line upgrade, and these projects frequently come with a significant special assessment or tax to the owner, which can be due immediately. If the neighborhood is in decline, property prices may be low, but so may the home’s estimated future market value.
Older houses can be good investment properties, but they can also drain an investor’s funds if not properly handled. Old houses provide many qualities that newer homes do not, but thorough appraisals and market assessments are required.
Real Property Management Bay Area can help investors evaluate and vet potential rental properties, as well as provide extensive information on the home’s neighborhood and the local rental market in the Mid-Peninsula and surrounding areas. We are committed to assisting real estate investors in making the most informed investment decisions. For more information, contact us online or call 650-696-1800!
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