Old vs. New Rental Property: Which Is the Better Investment?

In this blog and on our YouTube channel we’ve talked a lot about strategies like stabilizing your portfolio with new-builds and sourcing discounted resale properties through motivated sellers. It’s pretty clear that both old and new rental properties can be great investments, but which is better? Should your priority be to chase older homes at deep discounts and force value? Or should you keep things simple and lure tenants with newer construction?

Answering this question is a crucial step in writing your buy box and mapping out your next acquisition, which is why we’ve put together this guide to old vs. new rental properties. We’ll walk through the real pros and cons of investing in both and identify the circumstances in which one shines over the other. By the end, you’ll be able to decide where old vs. new fits into your portfolio and why, in the long run, there’s probably room for both.

Why Age Belongs in Your Buy Box

When you think “buy box,” you probably think about price, square footage, and location / class of neighborhood, but age might not always make the list. However, age is a really important factor to consider. 

Property age can have a big impact on:

• cash flow

• maintenance and CapEx

• resident turnover

• ability to negotiate

• risk profile
  
  

How property age fits into your buy box will ultimately depend on goals, resources, and market conditions. In some situations older buildings are going to be the obvious choice while new-builds will be a no-brainer in others. 

The Case for Older Rental Properties

Older rentals have lots of advantages, as well as a few drawbacks. Here’s an overview of some of the factors to consider with aged properties:

Pros of Older Rentals

1. Better Purchase Prices
 In older neighborhoods, especially C-class areas, you’re more likely to find properties that need significant work and owners who are more motivated to sell. Outdated interiors and / or deferred maintenance force discounts. Sellers who are elderly or have inherited property are less likely to want to sink time and money into renovations. Generally you can find owners more willing to accept lower prices in exchange for a fast sale. 

2. Potential for Higher Cash Flow

It’s a pretty simple formula: lower purchase prices → lower debt payments → more room for cash flow.

If you buy a distressed property, rehab it to a solid rental standard, and keep your total all-in costs in check, your monthly cash flow will usually end up higher than a brand new property at full retail value. It’s not guaranteed and depends on your market, but older homes often win on immediate yield.

3. Value-Add Opportunities

Older homes generally offer more opportunities to add value, especially in cases where properties are heavily discounted because they need a lot of work. Targeting your rehab budget towards upgrades like kitchen and bathroom renovations, CapEX replacements, and bed / bath additions can add significant value in both the ability to charge higher rents and in forced appreciation and instant equity. 

Here’s a real life example:
We acquired a 3 bed / 1 bath mid-century property in an established C-class neighborhood. Along with giving it some fresh paint and new carpets, we converted it into a 4 bed / 2 bath by converting a carport into an additional bedroom and adding a second bathroom. These upgrades enabled us to appeal to larger families and increase our asking rent, plus added value to the property long-term. 

4. Stronger Rent Comps in Established Areas

Older, established neighborhoods usually have lots of similar rentals nearby. That’s a huge advantage for investors as it provides a very clear picture of what the market is like. You can often pull comps from 10, 15, or even 20 nearby rentals of similar square footage, age, and bed / bath counts, which makes setting rental rates a breeze. 

Rule of thumb:
 In older areas, stick as close to the subject property as possible when pulling comps, ideally within a quarter of a mile. Once you’re a half mile or more out, you may be in a completely different micro-market.

5. More Negotiation Leverage

When you’re dealing with a property that needs work or a motivated seller you simply have more leverage. You can negotiate deeper discounts, ask for repairs or credits, or structure creative deals. New-build properties rarely offer that kind of flexibility. 

Cons of Older Rentals.

1. Higher Maintenance Costs and Surprise Repairs

Even if you buy a turnkey older home, there are variables you can’t fully control. Older plumbing, electrical, and framing / materials are going to need more frequent attention and can be costly to repair or replace. Plus, you won’t always know the full history of what’s been done to the house and “quirks” left over from past work can come with surprises. In general, you’ll almost certainly be looking at more frequent small repairs and less predictable maintenance over a 10 to 15 year horizon. 

2. Immediate CapEx You Need to Budget For

It’s easy to get caught off guard with outdated CapEx. Either you’ll immediately need a new roof, water heater, and HVAC system, or you’ll have to start saving for those big ticket items right away. Even with systems that, in theory, should have several good years left in them it can be hard to know the true age. An 8-year-old HVAC that’s been running in the Alabama heat its whole life could easily be on its last leg. 

3. More Resident Turnover 

In some cases residents will stay for years, but in many C-class neighborhoods where there are lots of similar rentals and options are abundant, residents tend to move more frequently. More turnover means more vacancy, more make-ready costs (paint, carpet, cleaning), and more wear and tear over time.

4. Less Energy Efficiency

Generally speaking, the older the home, the less energy efficient it is. Older homes usually weren’t built with tight building envelopes, modern insulation standards, or energy-efficient windows. That means higher overhead for you during vacancies, higher bills for your tenants, less comfort in very hot or cold climates, and a lot of potential for complaints. We’ve seen cases where tenants moved out specifically because energy bills became too out of control, so this really can be a big deal. 

The Case for New-Build Rentals

Now let’s flip to the other side: brand new homes in newer developments that are often surrounded by homeowners rather than renters.

Pros of New-Builds

1. Strong Resident Demand

Affordability is a major issue nowadays and more people than ever are renting instead of buying homes. However, renters dislike when buildings require constant maintenance and need surprise repairs as much as landlords. Given the choice, many renters will pick a brand new energy-efficient home with a modern layout and finishes. Plus, once these residents are in place, they are much more likely to re-sign leases for years thanks to superior comfort and livability. 

2. Lower Maintenance (At Least Early On)

With new-builds, everything starts out fresh. The roof, HVAC, water heater, appliances, plumbing, and electrical are all brand new. That means you can reasonably expect not to have any serious maintenance concerns for at least the first 24 to 36 months (usually longer). Plus, everything will be under new warranties and builders will often stand behind their work for a defined period, massively lowering your risk in the event that anything does break down.

3. Predictability and Stability

If a low-risk investment is what you’re after, a new-build is hard to beat. New homes in planned communities full of homeowners tend to appreciate steadily as the communities become established. They also tend to attract a more stable base of tenants that includes a lot of families and high-earning individuals. Plus, if you decide to sell, your buyer pool isn’t just limited to investors. Because these properties are in homeowner-led communities, they have plenty of appeal to retail buyers who are often willing to pay more. 

4. Amenities and Resident Experience

Planned communities often come with shared amenities like pools, clubhouses, walking trails, playgrounds, and green spaces. These perks attract new residents and boost overall tenant satisfaction. They also help keep existing residents in place by giving them more opportunities to socialize, get to know their neighbors, and form stronger ties in the community. 

5. Scalability

One underrated benefit of new-construction communities is that you can scale in the same neighborhood. You can buy one house now and then more as new phases of building are completed. Some developers may even offer investor incentives that enable you to purchase multiple properties at once. Having a portfolio all in one development can enhance that aforementioned predictability and really simplify operations. 

Cons of Newer Rentals

1. You’re Paying Retail

With new construction you’re generally buying a house at full retail value. Although there are exceptions, developers usually have plenty of interested buyers looking to move in themselves so there is rarely a ton of room to negotiate. If you’re an experienced investor who lives and dies by deep discounts, that can feel like a deal breaker.

2. Limited Value-Add Potential

New-builds are the opposite of fixer-uppers. They already have modern layouts, contemporary finishes, and new systems and appliances. This means that the gap between what you paid and ARV is somewhere between miniscule and non-existent. After-repair-value implies, after all, that there is something to repair. If there’s not, then you are not going to be able to force appreciation, simple as that. 

3. Yield May Look Lower on Day One

Because you’re ponying up at full retail, your cash-on-cash returns and immediate cash flow may look weaker than an older house bought at a discount in a C-class area. The gap begins to close the longer you hang onto the property thanks to lower maintenance costs and reduced turnover, but patience is required. 

Old vs New: Side-by-Side Comparison

Here’s how the trade-offs shake out:

• Price:

  • Generally speaking, you’re much more likely to find discounts with older homes. Great deals tend to come from situations where properties need a lot of work or sellers are motivated. That is almost never the case with new-builds, so they usually cost more.
    
    

• Day-One Cash Flow:

  • If you buy an older property at a discount, your immediate returns are going to be higher. The gap starts to narrow over the long-term, but if you pay more for a new house it will take longer to see a profit.

• Maintenance & CapEx:

  • New-builds win by a long shot. Houses that are mint condition from top to bottom with full warranties, backing from builders, and no hidden histories are inevitably going to have lower maintenance costs and far fewer surprises than older buildings.

• Resident Appeal:

  • We’ll give this one to new-builds since tenants will usually prefer them as long as they offer good access to amenities. If new houses sit in developments that are far outside of town and less conveniently located, it can be more of a toss-up.

• Appreciation:

  • It’s a draw. An older home in the right area can do great and offer better opportunities to force appreciation at the start. Meanwhile, new-builds in strong communities are best for steady, predictable growth.

• Value-Add Potential:

  • Older homes win by a mile. When it comes to adding value, the more work a property needs, the greater the possibilities.

• Risk Profile:

  • New homes win for stability and predictability. You know the full operating history and have brand new everything, complete warranties, reliable tenants, steady appreciation, and strong resale options. Older properties are basically guaranteed to come with surprises.

So Which Is Better for You?

To answer this question, you first need to ask another: what are your goals? 

If you’re comfortable managing risk and are looking for deep discounts, value-add opportunities, faster ROI, and strong cash flow, older homes are going to fit the bill. 

If you can afford to be patient and want stability, fewer headaches, and predictable performance over 10 to 15 years, new construction in a planned community is the way to go. 

And if you’re building a large portfolio? There’s probably room for both.

You might want to hold a few older, value-add properties for equity and cash flow, and anchor your portfolio with newer, low-maintenance homes for stability and predictability.

The Bottom Line

Age is one of the most important factors in your buy box. Older properties align better with some investment strategies while new-builds are perfectly suited to others. When you’re writing your buy box for your next acquisition, ask yourself what your priorities are. Whether you’re looking for discounts and cash flow or predictability and less fuss, property age will be key. Ultimately, both old and new properties can be solid assets and having a mix of both is a great way to achieve long-term stability and strong profits. 

Need help deciding where age fits into your buy box? It always helps to talk through your investment goals with someone who knows about the property game in your area. Find your local Evernest Investor-Friendly agent to get started. Find your local Evernest branch and reach out to one of our agents to get started.