Investing in older single-family homes intended for use as rental property can be a highly effective strategy. However, it’s important to keep in mind that there are numerous pros and cons associated with choosing older homes versus new constructions. For example, older homes often come with a great location, a lower purchase price, and a more stable market rate that can attract many investors.
But there are also downsides to buying an older home, including a higher cost of repairs and improvements, lower energy efficiency, and the risk of losing 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
There are various benefits to acquiring older homes to use as rental properties. Perhaps one of the most significant benefits an older home offers is its prime location. Unlike newer homes that are typically far from many of the area’s best amenities, older homes can often be found within a short distance of desirable social and commercial areas.
For Millennial renters, young professionals, or seniors looking to enjoy their retirement, a rental home with easy access to the city center or other attractions can be a strong draw. Older properties are also found in established neighborhoods, typically with more predictable rental rates. Being able to reliably forecast your rental income is one of the most important benefits of buying an older home.
In many areas, older homes offer the benefit of being more affordable than new construction. This can significantly lower the upfront cost of the property and allow investors to control how much is spent on any improvements or upgrades. While an older home will likely need some work, investors can control costs by doing some of the work themselves or by scheduling projects to maximize cash flow.
Depending on the age and condition of the home, investors may also be able to rely on higher-quality construction and a more traditional floor plan. Such features may appeal to certain demographics, particularly renters looking for a home with a unique look or feel.
Drawbacks of Older Rental Homes: Costly Updates and Maintenance
While the numerous benefits associated with older homes can make them attractive to investors throughout the country, there are also notable drawbacks that warrant consideration. Older homes often feature outdated heating and cooling systems, plumbing, and wiring issues that may arise over time.
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
Another disadvantage of buying an older home may be the state and character of the neighborhood. It’s important to research a neighborhood before buying to assess dangers and rewards. Be vigilant for signs of neglect, which may indicate future troubles.
Often, your chosen home’s neighborhood needs water main or sewer line replacement. A large special assessment or tax to the owner may be owed immediately on certain projects, which may not have been budgeted for. In a declining location, property prices may be cheap, but this may not represent the home’s future market value.
Older houses can be profitable investment properties, but if they are not handled properly, they can drain investors’ funds. Old houses have numerous advantages over newer homes, but rigorous appraisals and market assessments are necessary to reduce repair and remodeling risks.
At Real Property Management Midlands, we can help investors evaluate and vet potential rental properties and provide detailed information about the home’s neighborhood and the local rental market in West Columbia and nearby. We are dedicated to helping real estate investors make the best possible investment decisions. Contact us online or call 803-403-8838 for more information!
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