When you come across an older building, you will have to ask yourself, "should I renovate this or knock it down and build new?" For most of my career, I was always the guy who would renovate. Maybe it was a fix-and-flip, maybe it was a BRRRR, maybe it was a condo conversion, but I would almost always renovate. In fact, I made a lot of money over the years dealing with old and icky.
I have to tell you though, I have changed. I almost always favor new product now. Let me tell you why.
The demographic that is most active in home purchases and rentals are the millennials and early stage Gen-Z, and they like new product. For the most part, in the US and Canada this group grew up in a middle class environment, in a relatively nice home and that is what they want to move into. With interest rates being low for a long time now, a lot of new product has come on the market. I have found in my own rental portfolio, my 1980's vintage rentals, although renovated well, can't compete with the brand new duplex or apartment building down the street. Given a choice, most people prefer new.
I think the useful life on older properties is becoming limited. Not that those buildings are ready to fall over, but I think they will become harder and harder to sell. If you are investing in long-term buy and hold rentals, I would recommend not buying anything older than 1990 (and newer if possible). If you have older product, perhaps you might want to start thinking about an exit strategy, especially if your buildings are pre-1970.
That opens up a lot of possibility in land development and new construction. Building new product is what the market wants and you can provide that. You also have the ability to purchase some of these older properties at a discount, knock them down and provide newly serviced lots for builders.
Learn more about "Land Development as a Profitable Investment" in my newly released book. Available by clicking here
Learn more about "New Construction as a Profitable Investment" in my newly released book. Available by clicking here
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