Author Topic: Is there a premium percentage for a new house?  (Read 1105 times)

Distshore

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Is there a premium percentage for a new house?
« on: July 17, 2015, 06:22:27 PM »
I am considering buying a new construction (2015) twin as a rental property.  The only comps I can find are new"er" properties about 20-25 years old.  I figure the brand new one will go for a premium over these - but I don't know how much.

Does anyone have a rule of thumb for the premium a new house is worth over a second-hand one?

As it doesn't have a rental history, I definitely want to value this from the comp perspective too, not just cash flow.

Thanks in advance!

genesismachine

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Re: Is there a premium percentage for a new house?
« Reply #1 on: July 19, 2015, 04:15:43 PM »
It's hard to answer a question like that. In general, newer construction is made up of pretty crummy materials (lots of particleboard, OSB, etc...) that may or may not stand the abuse of rental use very well. On the other hand, there are things like appliances, and furnaces which may be more modern/reliable/etc...

In my limited experience, I have not found newish houses to command any kind of premium. In fact, there are a lot of people who like the older houses and will only buy those. 20-25 years old is old enough to not be considered new, but not old enough to really be part of the craftman/high quality styles of the past.

Of course, it depends on the house ultimately as not all houses from all years look the same.

Another Reader

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Re: Is there a premium percentage for a new house?
« Reply #2 on: July 19, 2015, 04:33:06 PM »
New houses in Arizona are priced 10 percent or more above used.  That does not translate into a rental premium.  Renters are more concerned about proximity to employment, shopping, and family in the area.  New construction tends to be farther out from the core, and does not rent well.  Lower rent and higher vacancy should be expected if your market is similar.

Distshore

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Re: Is there a premium percentage for a new house?
« Reply #3 on: July 20, 2015, 02:40:11 PM »
Thanks for your opinions.  We will go take a look on the weekend, but I am pretty sure you will be right about the relatively cheaper construction. 

In the area I'm looking, the suburbs attract the better renters with real jobs (and we do have a place in the town center, so I can confirm that from experience!), so that's not so much a worry.

However, I am concerned our realtor is blowing smoke about the rental rate; and of course a place is only new once, for 5 minutes, and then it starts deteriorating...