Buying new single-family rental properties in Chicago is a great plan, but there are both pros and cons to choosing a newly built home. While more modern properties offer benefits like more customization, higher energy efficiency, and not as much maintenance will be needed in the first few years, all of these things may cost you more up front. This is often true not only because upgrades aren’t cheap, but because most of the times, there is usually very little room to negotiate on price. No matter which property you decide to get, it’s crucial to weigh all of the pros and cons carefully to warrant that you’re getting a good return on your investment.
First and foremost, buying a new home to use as a rental property can be a good investment. From a cost standpoint, new construction offers investors the chance to buy and immediately rent out a clean, attractive rental home with a range of attractive upgrades. Since the upgrades are already incorporated in the purchase price, there will be little possibility that you will incur any out-of-pocket repair and improvement costs to get the property ready for your first tenant.
If the new home is all ready to move in, rental income can start straight away. Included in the price of a new home are also an array of upgrades that can help investors customize the rental home to appeal to a particular renter demographic. For example, a new home that has been upgraded with smart technologies will likely entice a Millennial renter than one that has not.
Tenant appeal is a vital aspect in any successful rental property, and new homes offer renters something older properties cannot: the chance to be the first and only tenant who has occupied the home. A new property also allows renters significant utility savings, and this is because fresher homes are normally prone to have higher energy efficiency throughout. Renters looking to stay long-term may be largely fascinated by these features, and by the idea of appreciating a modern, low-maintenance, energy-efficient home for many years to come.
Though these are all compelling reasons to invest in a new home for your succeeding rental property, there are several downsides to reflect on top of every advantage. For example, it’s imperative that you don’t forget that not all builders are equal and that some may take advantage of cheap materials or try to cut corners to save money.
Purchasing shoddy construction can end up in endless haggling with the builder to try and get things done correctly, as well as higher repair and maintenance costs if you can’t get them to do the work the right way. One more item on the con side of things is the often-limited number of options available. Although customization is conceivable to a degree, it is more often a matter of choosing between a very limited set of wall colors, countertop styles, and so on, or risk driving the purchase price up even higher.
Eventually, if you are an investor who fancies a good bargain, buying a new home may not be the appropriate choice for you, for the reason that the price of new construction isn’t always dictated by the market or a previous owner, often leaving room for negotiation.
When you’re buying from a builder, they may not be as open to negotiation because lowering the base prices on their homes alters the data on comparable properties in the neighborhood and encourages future buyers to try and talk them down as well. Of course, this circumstance may change contingent on the circumstances, and it’s always a good idea to ask for any available discounts or other financial incentives. It is important to weigh all the pros and cons before choosing to buy a new home to use as a rental property in Chicago. But with so much to consider, it can be hard to know whether a new property is a right investment for your market and demographics.
You need comprehensive market information, like the kind offered to all property owners working with Real Property Management Chicago Edge. We perform market assessments for all potential rental properties, ensuring that owners who partner with us have the tools and information they need to make the best possible investment decisions. For more information, contact us online or give us a call at 773-904-7700.
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