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Advantages of Investing in New Construction Rental Properties

Because there are substantial benefits to investing in new construction rental properties, many people are making the switch from renting out old rehabbed houses to offering built-to-rent, newly constructed homes to their tenants. Additionally, there’s a massive housing shortage that’s funneling investors into the new construction sector, giving them a taste of what this property type can offer. So, the word is spreading, pushing new construction rentals into the spotlight while older, flipped homes, with all their headaches, are becoming less popular.

What makes these newer rentals the preferred option among savvy investors? Let’s find out in this quick summary before we dive into all the fine details:

What are the benefits of investing in new construction rental properties? Newly built rentals are often in prime locations that not only boost rental appeal but lead to an increase in property values. They’re also low maintenance and, therefore, more cost-effective. Additionally, new construction properties sport lower vacancy rates, justify higher rents, and offer investors substantial tax breaks.

The Main Benefits of Investing in New Construction Rental Properties

Investing in real estate is an effective strategy for securing a steady income and building great wealth. This especially rings true with newly built homes that have quite a few benefits that pre-owned properties just don’t have. Because of this, deciding to invest in new rental properties will set you on the path to accelerating the growth and profitability of your real estate portfolio.

If you’re unsure about taking the plunge into the world of built-to-rent properties, we’ll unpack their unique benefits to help you understand their value, and how they can set you up for financial independence.

1. New Construction Rentals are in the Best Locations

When searching for existing older properties to invest in, you’ll typically find them in one-off random locations, if you can find them at all with the current housing shortage among us. In contrast, new construction properties are strategically situated in hotspots with booming economies and a great job market that often sports Fortune 500 companies. You’ll also see them in areas with low crime rates, good school districts, and low vacancy rates. A prime location not only draws a high number of potential tenants but also tends to offer an appreciation in property values, which can result in a higher ROI.

Morris Invest spends years researching the best housing markets to ensure our properties are built in lucrative, prosperous areas where a rental property will perform well financially. We’re currently building in Lubbock, TX. If you would like to hear about how well this area performs, don’t hesitate to book a call with one of our team members.

Top Benefits of Investing in New Construction Rental Properties

2. Low Maintenance and Cost-Effective Compared to Rehabbed Properties

New construction properties present a unique advantage in terms of maintenance and longevity. These properties, built from scratch with all new components, are less demanding in the upkeep department when compared to older properties. The use of modern, durable materials and adherence to the latest building codes and regulations ensures higher structural integrity. Additionally, with everything from the foundation to the roof being brand new, the frequency of repairs is significantly reduced. This makes new construction rentals a more cost-effective investment choice that can save thousands in repair costs.

If you’ve ever owned an older rental, then you know what I’m talking about. If the plumbing needs to be replaced because the house is 60 years old, it could end up costing $10,000 to $20,000, which comes out of your pocket. Older homes constantly break down – from leaky roofs to electrical issues, it’s going to happen sooner rather than later because of the age of the home.

In addition to the home itself being brand new, built-to-rent properties will have new appliances with warranties, which can save even more money in the long run.

3. Newly Built Rental Real Estate Will Have a Lower Vacancy Rate

One of the benefits of investing in new construction rental properties is that they typically have lower vacancy rates, and this is due to several factors. First, tenants are attracted to the appeal of living in a new home, and this can include the allure of a modern design and fresh interiors. Second, new properties tend to have more space that most older properties can’t offer. Let’s face it, older houses were built pretty small; larger homes just weren’t as practical back in the day. Nowadays, we expect larger modern floor designs and new homes certainly offer that.

Third, tenants can get fed up with constantly having to call when repairs are needed, which is what happens often with older rentals. In many cases, a tenant will decide to move when they feel they are in a run-down property. When you add this all up, it means a tenant will be happier in a new rental, one they can call home for years to come.

4. Built-to-Rent Properties Offer Incredible Tax Benefits with a Cost Segregation Study

New construction properties present investors with significant tax benefits, primarily through the ability to conduct a cost segregation study. This type of study that’s performed on newly built properties involves a detailed examination and reclassification of a property’s non-structural elements. It moves items like cabinets, sinks, patios, and the like into expedited tax depreciation periods of 5, 7, and 15 years, so it’s not lumped in with the overall building structure, which is typically depreciated over a 27.5 year period. This can save an investor thousands of dollars.

Morris Invest includes a cost segregation study in most of our properties so the investor can start saving money immediately. Be sure to dive into our article on the topic – Is a Cost Segregation Study Worth it When Investing in New Construction Properties?

You can also check out our video that goes into detail on what a cost segregation is and how you can use it to pay zero dollars in taxes:


Additional Advantages of Buying a New Construction Rental Property

Below, you’ll find a summary of even more benefits that should have you convinced that this is a financially lucrative option:

  • New construction properties typically demand less money upfront than older properties.
  • Built-to-rent houses often come with better financing options.
  • When a real estate investing company purchases bulk material for a large lot they will build on, it allows a discount to be passed along to the investor.
  • Newly built properties are in high demand among renters, and with a low inventory due to the housing shortage, this ensures low vacancy rates, as well as higher rents.

Morris Invest Financial Resources & Programs

For additional helpful resources, see our Funding Page that covers working with Fund & Grow to find the money needed to make a down payment on purchasing a rental property, as well as our page that contains details on how to Lower Your Taxes.

Unlock Financial Prosperity by Investing in New Construction Rental Properties

Understanding just how great the benefits of investing in new construction properties are and moving forward with obtaining a cash flowing rental, will set you on a pathway to unlocking financial prosperity.

Take the first step toward financial freedom by booking a call with Morris Invest to discuss your goals. Additionally, if you decide to invest in a rental property, we’ll take care of every detail for you to make it happen – from transferring funds from your 401(k) to a self directed IRA so you can utilize it for a down payment, to placing a tenant in your new rental, and everything in between.

Before you go, grab a cup of coffee and watch this video that takes you on a tour of the process of building a new construction property:

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