Fixer-upper vs New Build - What's the Smarter Investment?
Feb 19th, 2021
One of the first tough decisions you need to make when you're getting into the rental market is deciding whether to buy a fixer-upper or purchasing a new build that is built for rental purposes.
The biggest factor that needs to be considered is the cost of either fixing up the cheaper, older house or making the choice to build a new house that caters exactly to what renters will want or need. Here are some pros and cons for both sides of the coin.
Fixer-Upper House
Pros
Lower price - when you're buying a fixer-upper, the price is going to be significantly lower. Older homes will be valued less than a new home in the same area, resulting in the fixer-uppers to be in a lower tax bracket decreasing the overall property tax.
Better locations for the price - one issue with building a new house is that you need to find land in a desirable location which costs a lot of money. When you buy a fixer-upper in a desirable location, you're only going to be paying for the cost of the house, not premium land plus the cost of building a house.
Cons
Outdated and non-efficient appliances - something you need to consider when buying a fixer-upper is the cost of modernization. When purchasing a fixer-upper you need to factor in the cost of replacing all old appliances, while also looking into how to prevent heat loss and increasing energy efficiency.
Frequent maintenance - with an older house you have to always be expecting something to break or need repairing. When you purchase a fixer-upper, you have to always keep room in your budget for fixing things like the roof, replacing windows, or upgrading the furnace.
New Build House
Pros
Curb appeal - renters will usually gravitate towards a newer, nicer looking house to rent. This increased curb appeal can help you mitigate vacancies, while also allowing you to charge a higher rent, as there will be increased demand for your property.
Energy and cost efficiency - In Canada, one of the biggest monthly expenses is heating and energy consumption. With a new home you can be sure that your furnace and A/C will both be efficient, while also knowing that when the winter hits, the house is going to be free of drafts and won't lose heat through your windows or doors. Having efficient appliances can help save you money, and helps reduce your carbon footprint.
Cons
Higher Cost - When you purchase a brand new build, you're not going to be getting any deals like you would on a fixer-upper.Depending on where the house is located, you may end up paying significantly more in property taxes.
Move-in Delays - With a new build, you have to wait for the house to be built. From the time you put your initial money down or get a mortgage from the bank, to the time you collect your first rent payment, you will not be making any money on a new build.