Distressed properties may be sprouting all over at low-low prices, but what happens when these can’t be flipped or rented? Or, if they do happen to get sold or leased, will it be at the rate you anticipated?
From this opening argument stems the next question: Should you buy new or old properties when investing?
It’s one-sided to argue that investing in old properties is useless or unwise. So, to balance the scale, we’ll present two sides of the coin.
Factors To Consider When Buying Old or New Property:
Location is everything – Is the property in a compromising community, which is marred by low-income and high-crime rates? These are issues that all investors should consider before putting their capital up on the block. A bad area will equate to low rental rates, low tenancy, and higher delinquencies in monthly payments.
On the other side of the scale, some older properties will be easier to market, because they’re close to established shopping districts, schools, attractions and centers of activity. Compare this to new construction sites that are miles away from the action.
Maintenance – Like an old rundown car engine that requires frequent maintenance (unless it’s prodded and primed as a muscle show car), an old property will usually require frequent upkeep.
However, the grass isn’t always greener on the other side.
When you think of a long-term cash flow investment, at some point in later years, this now new property will be regarded as old. And in the same instance, it will require yearly upkeep also. The difference is finding how much you want to invest upfront on maintenance expenses alone.
To give an objective response to the question, it’s best to create a list of pros and cons based on the market you’re looking to invest in.
Perhaps you’ve landed upon a treasure that you know will have a high turnover. It’s not uncommon for some towns to value historical properties that have a rich story woven into them. Many residents are willing to pay high fees for these preserved locations. In other instances, it can cost more when buying for less.
To summarize the views of out with the old, in with the new – in terms of investment, doing either is based upon:
- 1. The Location – where the property is of most market value
- 2. The Cost of Maintenance – compare upfront fees to future fees of upkeep
- 3. Target Market – will you be attracting good tenants or bad tenants?
Remember, “low-risks and high-returns” is the mantra by which Jason Hartman suggests investors must live by. (Top image: Flickr | KaCey97007)
The Commercial Investing Center Team