The advantages and disadvantages of renting older properties

Several classic debates in real estate investing are unlikely to be resolved in the near future. Is it wiser to invest in newer or older properties? Factors include potential rental income, mortgage costs, and capital gains tax implications. If you choose long-term leases, do you prioritise cash flow or capital growth? Repay debt on your own investment portfolio or expand it by refinancing to cover new properties? Purchase properties in B and A-rated areas, or seek higher profits in D and C areas?

The advantages and disadvantages of renting older properties

In this article, we’ll talk about the advantages and disadvantages of having modern rentals over older ones. I am confident that property investors will be behind each argument, but this is intended to provide a summary of the advantages and disadvantages of each property type.

Advantages of Buying Older Properties

There are three primary advantages to buying older rental properties:

1. Secure location and nearby neighbourhood.
2. Rents and house prices are predictable and stable.
3. Mature properties usually have better construction.

The biggest advantage of buying old rental houses is that they are typically located in well-known, picturesque neighbourhoods closer to the most important town centres. As a result, they tend to attract tenants that prioritise closeness and lifestyle. This rental pool offers some advantages and downsides, depending on the goals of the landlord concerning rental income and property value. On the other hand, they are more likely to be transient tenants who do not stay for extended periods of time.

The next advantage of buying old rental properties is that market prices, such as rentals and values, have been well-established due to the area’s long history, making it easier for a landlord to predict rental income.

Finally, investors who buy older properties believe they are better constructed than newer properties. What I can tell you for certain is that there is a clear trend towards increased density in buildings. Older neighbourhoods typically featured larger lots with residences spaced farther apart, making them appealing to those looking to buy a property with more land. As land prices rise, builders are seeking to fit more houses on the same quantity of land.

Let us now examine the advantages of modern properties which also serve as disadvantages for older rents.

Advantages of Buying New Rental Properties

There are five major advantages of newer leases:

1. Better schools in the neighbourhood.
2. Low maintenance expenses mean reliable cash flow
3. Higher energy efficiency.
4. Higher possibility for capital gains.

The biggest advantage of buying new rental properties is that the property may typically be located closer to new and higher performing schools. School quality is the most important characteristic that exceptional tenants consider when rent a property, and this directly affects the landlord’s rental income. Newer rental properties usually attract more tenants since they are zoned to better schools, increasing the landlord’s chances of consistent rental income.

Second, because all of its major components are relatively new, modern homes have lower capital expenditures for the homeowner during the next decade of ownership. Even in the case of a remodelled old lease, unless the pipes or even the heating, plumbing and electrical systems have been rebuilt and upgraded, you will likely find more expensive repairs on older rental homes than on newer ones. That is not typically the case with growing old rental properties. In other words, if you want your property portfolio to operate regularly, you should buy newer rental properties.

Third, newer properties are typically more energy efficient due to improved insulation and larger windows. This helps renters save money on their utility bills, which will encourage them to stay with you for longer. You know, when a tenant initially considers renting your property, they may be merely look at the leasing price, but landlords should also consider the mortgage costs and potential rental income. However, when they consider renewing their lease, they look at the combination of leasing costs and utilities. If your outdated rental home causes your renter to pay £250 in electrical bills each month during the summer, you can be confident that they will look for a more energy-efficient rental during the renewal period.

This leads to the fourth advantage of buying new properties: longer rental provisions and lower turnover. This happens for several reasons. To start with, the renter pool in newer locations tends to be drawn to the region’s universities, and parents and students themselves are normally hesitant to change university, which can positively impact the landlord’s rental income. Newer contracts typically have three-year lease terms, as opposed to renters who relocate every year. Second, modern buildings require less repairs, which means less bother for your tenants and a much better leasing experience.

There is undoubtedly some risk and unpredictability associated with buying in a newly developed location, but that same risk provides the opportunity for capital growth returns if you sell your home, that you just cannot obtain in older established areas.

Discover the advantages and disadvantages of renting older properties with Western Lettings Glasgow

Curious about the advantages and disadvantages of renting an older home? Call Western Lettings Glasgow today at 0141 357 0436 to discover more! Our skilled team is ready to walk you through the unique characteristics and potential issues of older homes. Don’t delay—call us today!