When it comes to finding your next investment property, one of the factors you’ll likely consider is whether you’d like to buy an old home or a new home. There are pros and cons to both. Which one you pick depends on several factors like condition, location and the ability to appeal to prospective tenants.
Table of Contents - Should You Buy a New Home or an Old One as an Investment Property? There are Pros and Cons to Both
Pro: The historic charm of an old home
There’s something to be said for living in a home with a lot of character. When advertising for tenants for your investment property, historic charm is a selling point. If your property is indicative of a certain architectural style, like Neo-Gothic or Craftsman, people will be eager to live there for years to come. Interesting architectural features like arches, ornate windows and custom moulding are especially attractive and should be preserved as best as possible.
There is a reason why certain homes have such a lasting impression on Canadian history. These homes have quite literally lasted thanks to excellent craftsmanship and sturdy building materials. If you consider how many storms the property has weathered, it’s likely a sound building.
Back when these homes were built, the land was much cheaper. Older homes may be sitting on more land than newer developments are, allowing for features like garages/parking and sheds. This is an especially attractive feature for older homes in downtown areas where parking is scarce.
Speaking of cars, if the home is older than the automobile, chances are it’s also closer to a downtown center. Tenants can easily get to work, dining and entertainment. While the property value will be more expensive, the amount you’ll be able to charge for rent will comfortably cover your costs.
Con: How old is too old?
While an old home has remained sturdy all these years, it wasn’t just the craftsmanship of yesteryear keeping it standing. Old homes tend to require more regular repairs, which could eat into your profits. With an older home, you’ll want to take special care during the home inspection that no serious issues are looming, like with the foundation or electrical.
If the home was built before many of the modern amenities we’ve come to expect, like electrical wiring, plumbing and HVAC, they may have been added in a way that isn’t holding up well decades later. Replacing wiring and pipes is not cheap, and neither is addressing these issues when they go wrong.
Besides updating the home utilities, an older home could have a myriad of interior styles from updates over the years. Maybe the kitchen hasn’t been updated in 20 years, but the bathroom is completely modern. You may need to plan renovations to make your property’s interior more consistent and appealing.
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You could say our ancestors were minimalists: people had fewer clothing and items, so they needed less storage space. Closets are often tiny in old homes compared to new developments. There may not be a garage or room enough for multiple tenants to have guaranteed parking. People were also literally smaller back then, so some doorways, stairways and rooms may feel a bit cramped to larger tenants.
Pro: That new home feeling
There’s something to be said for the peace of mind that comes with buying something new. A new property means you shouldn’t have to worry about any major repairs like a new roof or new HVAC for another 10 to 20 years. You won’t have had generations of wear and tear from families and tenants that caused various dings and wearing down over the years.
New homes are built with our modern amenities in mind, so you aren’t dealing with electrical wiring added 40 years after the home was built. A new home is more likely to be designed for appliances like a refrigerator, dishwasher and laundry unit. You won’t have to worry about where to fit those in when trying to upgrade for tenants.
New homes are also likely to come with a new home warranty. Builders are required to offer a third-party warranty in British Columbia, Alberta, Manitoba, Ontario and Quebec. In other provinces the third-party warranty is optional, but any member of the Canadian Homebuyers’ Association must offer a warranty. The third-party warranty covers deposit insurance and protects against defects in work and materials.
Those same homebuilders (should have) built a property that meets current building codes, meaning that at least for now you won’t have to make any expensive changes to keep in compliance. Most importantly, tenants will be safer, and you’ll decrease your liability.
Because they are often part of a larger development, new homes are often less expensive and have more square feet than old homes. Newer homes are more likely to be energy efficient, which is a bonus both for you and your tenants. Both of these factors will attract younger tenants.
Con: What don’t we know about this house yet?
For the same reason, old homes are so charming, new tract homes seem so boring. However, this should be less of an issue for renters who don’t plan to stay long-term.
New houses need time to settle, regardless of their size, type and foundation. Settling can cause cracks in doors and door frames and the foundation. While you do have that third-party warranty from your builder, they may not put you at the top of the queue.
New property developments are also less likely to be in the heart of a vibrant downtown. There may not be many nearby amenities, and commute times could be longer for prospective tenants.
This factor may not be at the top of your mind, but vegetation in new housing developments is often immature. Landscaping could be lacking when you first attract tenants and may require some extra investment to give plants some TLC to build a stunning yard.
Old or new? It’s up to you!
When deciding on your next investment property, consider whether an old house or new house is better for your portfolio and your level of involvement with your property. Will you go with vintage charm, or sleek and modern?
Pros and Cons of Buying an Older Home or Newer Home (first time home buyers)
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