Newly built apartments in the city offer perfect rentals – and here’s why

When discussing rental properties, people often mention Multifamily Residential. How many times have you heard someone say “I manage 20 units,” most of which are probably spread over several buildings?

From an economic perspective, this type of investment is logical. Four units under one roof instead of one, four rentals instead of one – you get the idea.

No one talks about condos as a viable real estate investment option. In fact, the word “apartment” has a negative connotation. Tell someone you bought an apartment as an investment and you can almost guarantee that someone in the apartment BiggerPockets Forum will laugh at you. You hear how bad homeowners associations (HOAs) are and how apartments appreciate more slowly than single-family homes.

Perhaps the biggest insult and final blow to your reputation is sharing that you bought a new apartment. No sweat equity? This is blasphemous – how do you achieve financial freedom?

Saying that you own a unit, or that you bought a newly constructed property without renovating it yourself, or that you purchased your deal on the MLS, is not sexy.

So what’s the highlight?

Condos are the most overlooked real estate investment anyone can acquire. This means less competition. For busy 9 to 5 investors or new investors trying to break into the market, this is your unique advantage.

Here we focus on newly built apartments in cities, where the best value is found. Read on to learn more about the benefits of this forgotten asset class.

better location

“location, location, locationWhen it comes to real estate, “” is everyone’s favorite mantra.

You’re more likely to find an apartment in a prime part of the city than a single-family home. To maximize space, developers build rather than expand. This makes apartments in the city even more abundant. This also means you can find them in ideal locations for rental properties.

As a condo investor, there are many ways to take advantage of location. Here are just a few.

Find your next trendy neighborhood

Want to take advantage of changes happening in your city? Investing in newer apartments in trendy or up-and-coming neighborhoods can offer tremendous potential for appreciation and rental income growth. These areas often attract young professionals and creatives seeking vibrant communities and diverse cultural experiences.

Ensure access to transport and major highways

Being located near public transport hubs or major highways increases the accessibility of new apartments. As such, these are ideal for renters who rely on commuting or who prefer the convenience of city living without the hassle of owning a car.

Taking advantage of convenience and comfort

Put yourself in your tenants’ shoes: People live in cities to be closer to work or for convenience. Residents are within easy walking distance of restaurants, shopping, entertainment venues, employment opportunities and transportation.

In today’s fast-paced world, renters value convenience and comfort above all else. Newly constructed apartments often offer features such as concierge services, secure parking, and modern décor to suit these preferences, making them highly desirable rental options.

Strong rental demand

The greater the population, the greater the number of potential tenants. But in the city, there is no shortage of people. This means there is ongoing demand for housing because there are a large number of renters at any given time. Here’s how to take advantage of this.

stand out

Newer units will stand out compared to their competitors. There’s a reason why luxury cars sell for more than used cars.

Unlike older buildings, new apartments often have state-of-the-art features. These appeal to modern lifestyles and low maintenance living. These amenities also attract quality tenants who are willing to pay extra for added comfort, convenience and security.

Focus on demographics

Demographics are also driving strong rental demand in the city. Demand for rental properties, particularly in urban centres, is expected to remain strong as younger generations postpone home ownership and prioritize mobility and flexibility.

Millennials are the first generation more likely to rent than own a home. It is also the most populous area. Millennials, like Gen Z, prefer the flexibility and convenience of renting to owning a home. Newly constructed apartments offer a worry-free living experience including professional property management services and maintenance, making them an attractive option for discerning renters.

Investing in new-build apartments allows landlords to take advantage of this demographic shift and generate stable rental income.

Any rental strategy can work

Apartments in city centers can be an excellent source of rental income because you are not locked into one investment strategy. according to your preferences and real estate investment strategyyou can get interest from any of the following categories of tenants:

• Short term rental: short term rental It only works if it appeals to them. The city is full of attractions. The apartment is located in a prime location in the heart of the city, attractive to tourists and business travelers. Time is at a premium when you’re only in town for a short time, which means commuting time can be limited. These people seek a convenient location close to attractions, restaurants, and more.
• You can also profit from seasonality. Cities host events such as festivals, major conferences, sporting events and other events, depending on the city’s popularity. High demand for short-term rentals in urban areas can result in substantial rental income, especially during peak tourist seasons or major events.
• Mid-term rent: Urban centers often attract people relocating for jobs, internships or temporary assignments, creating steady demand medium term rent characteristic.
• Let’s take the example of a travel nurse. All big cities have hospitals. Apartments near large hospitals may appeal to nurses who want to work, get home quickly, and have something to do during downtime. If they get a housing allowance or credit, why don’t they pay more to be closer to work?
• Long term rental: As discussed, there are more people in the city, which means there are more potential applicants. By combining this with convenience and other local amenities, you’ll further increase your chances of getting a great rental in your area.
• Rental appreciation is another issue to consider. Assuming the property is in good condition and in a good location, demand will remain the same. Over time, you can expect your rent to increase naturally due to inflation and other factors. If you buy an apartment in an up-and-coming area, you may also find that rents and property values ​​increase as the neighborhood improves.

Cheaper to buy than other forms of housing

You might get frustrated if certain property types feel out of reach. Generally speaking, condos are less expensive than single-family homes and multi-family properties. In markets where demand is high and prices are high, the gap will only widen further. For these groups, apartments make sense as an investment.

Here’s a story about how a Boston real estate agent helped two people burglary Couples:

“Both are interested in places in the same area of ​​the city with similar prices. One couple wants a house that adds value, while the other couple wants a newly renovated apartment. The couple who want to buy a house proposed Several offers were made, but none were accepted. A bidding war ensued for each property, with 15 or more bids well above the asking price for the apartment. was accepted.

Please note that the price of a new apartment is equivalent to the price of a house under renovation. Funds will be needed to bring the restored upper part into optimal condition. Even after updating, it will command similar rent to an apartment, assuming equivalent square footage, bedrooms and bathrooms.

While single-family homes may have higher resale values, condos are a better deal in Boston as rental properties. Home hackers in other expensive markets may find themselves in similar situations.

Reduce maintenance costs in all aspects

For new investors, newer condos are a great place to start. There’s less maintenance, so it’s almost like having training wheels for real estate investors.

Here are some examples:

• Reduce maintenance and repair costs: With newer apartments, landlords can benefit from lower maintenance and repair costs. Since everything is new, these properties are less likely to experience issues related to aging infrastructure and outdated systems. This means less hassle and more money saved.
• energy efficiency: New appliances are energy efficient. Newer apartments are designed to save water and energy. This will lower your landlord’s (if you pay) or tenant’s utility bills.
• Built-in CapEx Savings: Every investor is taught to have a rainy day fund to save for major expenses, called capital expenditures or capital expenditures. These are things like HVAC and roofing. Depending on the HOA, the budget may include this as part of your monthly payment. Even if not, you’ll still only have to pay a fraction of the cost to replace the common areas. Additionally, just because the building is newer, it will be a long time before you start saving for larger maintenance issues.
• Low maintenance tenants: There’s nothing to complain about when you rent out a newer unit. People also tend to respect new things and treat their apartments with the same care and attention as if they were their own home. make sure you Screen your tenants So go ahead!

final thoughts

Newly built apartments in urban areas are often overlooked, despite their compelling advantages. For beginners and investors with busy schedules, this can be a way to zigzag while others zigzag.

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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.