The demand for housing is at a constant high in the San Francisco Bay Area. This puts investors in a fortunate position – they can simply focus on which type of property matches their investment style and earning goals.
Let’s take a look at the distinct advantages of both new construction and established homes in terms of investment potential:
Why new construction makes sense as a real estate investment
- People have a “new is better” bias
Potential buyers and renters are easy to attract with new construction. In addition, having zero wear and tear in the property, new appliances and fixtures, and fresh warranty terms allow investors to justify a premium price tag.
- New construction presents greater value for your investment capital
While new construction tends to be priced higher than an established home, you can get more for your capital through builders’ incentives. You can negotiate with builders so that they can throw in bonus appliances or premium fixtures (sometimes installed free of charge) at a discount.
- You can get returns on your investment sooner
You can begin advertising your property for sale or for lease as soon as you close a deal with the buyer. You won’t have to bother with any maintenance and repair work to spruce the place up because everything is brand new.
- There is no need to worry about maintenance costs in the short term
With new construction, you get the benefit of having fresh warranty terms. While you can expect that there will be no serious maintenance or structural issues within the first few years of ownership, if there do happen to be unforeseen problems, these will be fully covered by the builder’s warranty.
Making the case for established, older properties
- You spend less capital on a potential-laden asset
If you’re working with a limited investment capital, an older home is the way to go. Established homes are typically listed at a lower price compared to new construction, which tends to follow the market rates. With an older home, you also tend to get more square footage for your money while also enjoying greater room for negotiation.
- History and character are strong selling points
Older homes have more character and, at times, tell a unique story. It could be something as simple as having mature landscaping, a charming array of hand-carved interior features, or the cachet of having been the home of a notable family or individual.
Because of this, older homes can draw serious interest from sophisticated, high-paying buyers. If you’re lucky, you can even attract a bidding war that can result in greater earnings.
- Older properties are usually built on larger lots
For people who value living spaces outside the house as much as inside it, established homes are the more attractive choice. In addition, the larger plot of land also affords investors greater potential for long-term appreciation.
- You are investing in a sure thing
Old homes are built in established neighborhoods. This means less guesswork about the community that your buyers or tenants will soon join or the kind of amenities and attractions they have around them. This makes it easier for you to do deliberate, targeted marketing.