Investors buying rental property in New Braunfels, Texas, often compare prices and projected rents. What they tend to underestimate is how much time each type of property takes to evaluate before they ever get to closing.
Yitzchak Pierson, an eXp Realty Broker Associate who helps investors buy along the I-35 Corridor, says the due diligence on a resale rental takes far more time and effort than on a new build. For many of his clients, that difference is a big reason they choose new construction.
The Hidden Time Cost of Evaluating Resale Rentals
Pierson describes the resale process as a series of filters, and a property can fail at any stage.
It starts online. “You need to have a spreadsheet lined up that you can immediately punch some numbers in,” he says. An investor looks at the list price, compares it to local rents, and decides whether the deal could work at all.
Often the answer is only at a lower price. “Originally it’s listed for 300, but I would need to get it for 250,000 for the numbers to even pencil out,” Pierson says. On top of that, the investor has to set aside money for capital expenditures and confirm that rent will cover the mortgage.
Then comes the in-person visit, where the investor checks the age of the roof, the AC system, and the water heater, and looks for signs of foundation issues. Many properties get ruled out here, and the search starts again.
Where Resale Deals Fall Apart
Even when an investor finds a resale home that looks promising, the work is not done. They still have to make an offer, get it accepted, and then use the option period to bring in an inspector and contractors.
“The deal could even fall apart at that point,” Pierson says. If the inspection turns up problems, the investor has to negotiate repairs with the seller, who may say no. If the numbers stop working, the investor walks away and starts over.
For investors who live outside the area, this cycle can repeat several times before they find a property that works.
What to Check on a New Construction Rental
Evaluating a new build is simpler because the condition of the home is largely known. Pierson says the focus shifts to location and rentability.
He looks at whether the neighborhood is near jobs, shopping, dining, and grocery stores, so it appeals to the widest range of renters. Then he looks at the specific lot.
“Making sure the house isn’t located next to like a drainage ditch or an eyesore or something that would be ugly for a person renting it to view,” he says. “They don’t want to walk outside every day and see something ugly.” He also avoids lots with a slanted backyard, which can limit how renters use the space.
Finally, he reviews the builder itself: the warranties offered, current incentives, the builder’s reputation in the community, and the quality of its materials.
Why a Third-Party Inspection Still Matters
A new home is not automatically a flawless home. Pierson still has a third-party inspector check every new construction property his investors buy.
The difference is what happens after the report comes back. “The builder fixes everything on that inspection report versus resale having to go back into negotiations with the seller,” he says.
For investors, that means fewer surprises and a faster path to placing a tenant. “It’s a lot less labor intensive to find a property to then purchase and immediately put a renter in there versus having to fix it up purchasing resale before you get a renter in there,” Pierson says.
Resale can still be the right fit for investors who want a lower entry price and are prepared to do the work. But investors who value their time, or who are buying from out of state, should factor the due diligence effort into their decision. Investors weighing both options can learn more about Pierson’s buying process on his Buy A Home page.
Yitzchak Pierson is a Broker Associate with eXp Realty in New Braunfels, Texas, serving buyers, sellers, and investors across the I-35 Corridor, including Canyon Lake, San Marcos, and Seguin. He has been named Best Real Estate Agent in New Braunfels three years in a row and hosts the YouTube channel Living in New Braunfels.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.
