I recently had another chance to sit down with Russell Westcott for an in-depth discussion; this one all about the benefits of new construction homes in the Edmonton area and how they can benefit you as an investor.
In this discussion we’ll cover the following topics:
- Can you just buy any new construction house to use as an investment property?
- Why you might not save money by buying an older home to renovate instead of a brand-new construction.
- Why it can benefit you to buy your investment property through a realtor instead of buying directly from the homebuilder.
We’ll cover quite a lot of information about new construction homes in this video, and if you’d like to learn more or take the next step in finding your perfect investment property, there are options at the end of this post.
If you haven’t already watched it, you can also check out our previous in-depth interview, Why Edmonton Real Estate... Why Now!
Can You Just Buy Any New Construction House To Use As An Investment Property?
The short answer is no. With new construction homes, not all floor plans, builders and areas will work for you. To begin with, at TriUrban we choose the lots very carefully before we even think about floor plans. The location of the lot in relation to parking, fire hydrants, light standards, power boxes - there are all sorts of considerations we make when choosing a lot.
Another factor is determining the ‘sweet spot’ between the build pocket and the maximum amount of rent you can get for that building, to ensure you don’t over-build. From the property developer’s point of view, they sell their lots by the front footage, which can average around $4,500-$5000 per front foot, so if we know that the perfect floor plan has a 20-foot build pocket, there’s no point buying a lot with a 22-24 foot one - and spending thousands of dollars on extra lot cost and space that’s not needed.
When it comes to finding the perfect floor plan, that’s something we’ve learned via experience over the years. From issues we’ve faced in the past - privacy, noise, smells and tenant parking are some of the big ones we’ve encountered - once you’ve learned how to deal with these issues you can start to create the perfect floor plan for your tenants.
Overall, it is important to get what you what (or what your tenant will want) by hiring the right construction team or builder. Not all builders are equal, and it’s important to find the right one that will work us to create the perfect investment property that attracts A+ tenants.
Why You Might Not Save Money By Buying An Older Home To Renovate Instead Of A Brand-New Construction
Looking at some of the case studies...
For example, you purchase an older bungalow, renovate and implement a legal secondary suite, your total input costs could easily be in the $425,000 to $450,000 range, not to mention the time and effort to make this happen. In this scenario, we've found that often you can have a brand-new home with a secondary suite that’s fully bundled up (that is, the landscaping, fencing, window coverings etc. are all completed, and the keys are ready to hand over to a tenant) for a similar amount of money, or even less, than the renovated bungalow would have cost.
That’s not to say that renovating an older house doesn’t work - everyone has to make their own decision. At TriUrban, we tend to see owning a rental property as part of a larger, more long-term investment, where you may keep a property for ten or more years as part of a long-term plan, maybe even for retirement. The issues we sometimes see with older properties is you renovate them and have a good cash flow coming in, but you still own an older property that may be subject to other costly repairs or maintenance items at your cost.
There’s no point having cash coming in if it’s all going towards repairs instead of paying down the principal on your mortgage! A new construction property will be under warranty, so you’ll be able to control that stuff. You know there will be no ‘big ticket’ repairs for many years, so that money can all be put towards paying off your mortgage.
Why It Benefits You To Buy Your Investment Property Through An Experience Realtor Instead Of Directly From The Homebuilder
One of the main benefits of going through TriUrban instead of buying directly from a builder is we have a lot of experience on both sides of the process - the real estate transaction and the building side. It is our job to represent your best interest and create air tight transactions. When you approach a builder directly, naturally their main interest is going to be selling you one of their homes.
If you decide to buy through TriUrban, we’re not tied to any one builder and make sure you get the best investment property possible.
So how does a person get started? The internet is an amazing tool to gather information and learn but it can only go so far. Once you have did your online research, crunched the numbers and have decided this is a fit for you it's time to connect for a call.
Once you reach out to us we'll sit down with you, get to know you and what your investment lifestyle goals - your budget, how hands-on you want to be with managing the home and so on - and then we can find the perfect builder, location and floor plan to suit your needs.
We’ll also look at things like - are you using a secure line of credit to source the down payment? Does that interest cost need to be covered by the cash flow of that property? Are you utilizing a JV relationship and need help getting information to present your offering? Do you live long distance and need help getting your power team organized? From there we can start to make recommendations to other industry professionals and reel together a solution so you can get what you want.
It’s all about giving you as many options as possible and tying it all together into one easy package that’s right for you.
As mentioned in the video, if you’d like to talk with me I’ve set aside some times for consultations. There are two buttons below: one to a simple form where we can narrow down what you’re looking for - if you’d simply like to gather some more information. The other will take you straight to my calendar, where you can book a 30-minute call with me to start exploring your real estate investment options.