Renters can be a great fit for new construction homes, if the location appeals to them and the price is within their budget.
So how can real estate professionals find renters who are ready to buy and help them choose a new construction home they’ll be excited to purchase?
The answer involves both renter-friendly marketing and knowing how to match the renter mindset to new construction.
Ken Pozek, a Realtor at Keller Williams Realty in Orlando, Fla., sells several hundred homes each year. Only a small percentage involve renters buying new construction, but when renters are sorted out of the total, Pozek figures up to one-third of them could choose new and many do.
Do the Math
Orlando is a major market for construction of both new homes and new apartments, so the rent versus house payment math matters a lot for buyers. When a new construction home is on par with a luxury apartment, renters take notice.
“A lot of people look at the new apartments going up, and they think, the average rent is like $1,600 or $1,700 and why would they pay that when they can buy a $250,000 house?” Pozek says.
New Means No Repairs Needed
Renters tend to gravitate toward new construction when their budget doesn’t stretch to rehabbing an older home after they’ve set aside a down payment and maybe closing costs, Pozek says. Updating carpets, paint and appliances can cost $20,000 or more. That makes buying a home in which everything is brand new an easy decision for some renters.
Many renters also prefer the contemporary style and low-maintenance obligations of a newly built home, says Gregory Damas, a certified new-home specialist with Berkshire Hathaway Fox & Roach in Philadelphia.
“Tenants prefer new construction when they can afford it,” Damas says. “It has the latest design, latest style, latest appliances, fixtures. If a house is 10 years old, [the countertops are] granite, and granite is not desirable anymore. Now, it’s all about quartz.”
Some buyers are so averse to doing maintenance that they envision selling their all-new home to someone else before it needs repairs, Damas says.
Moving from Renting to Owning
Pozek says, “Leases and new construction go really well together.” Some builders will push out completion of a home for up to 60 days to accommodate the end of a buyer’s lease.
“If it’s a deal the builder wants — which most of the time it is — they’re pretty flexible on trying to get you in at the right time,” he says.
If that’s not enough, some builders and real estate professionals will even buy out all or part of a buyer’s lease to help facilitate a home purchase.
Finding Ready-to-Buy Renters
Pros can use a number of marketing strategies to attract renters.
Pozek’s strategy includes home-buying seminars, held monthly in his office, networking with human resources managers to identify new employees who need housing and sharing intelligence with apartment building managers who need to find replacement renters for those who move out when they buy a home.
Damas handles apartment leases as well as home sales so he can connect with tenants who might contact him when they decide to buy. He says the typical time delay is two to three years, though some tenants buy within a year and others take longer. One, he recalls, waited nine years.
“She got engaged and she and her boyfriend not only bought a house from me, but they also bought two or three investment properties from me, so that one really paid out in a nice way,” he says.
Convert Millennial Renters into Homebuyers
A growing number of Millennials are well positioned income-wise to move out of their rental homes and into a home they own. These buyers value a real estate professional’s negotiation skills and guidance through the homebuying process, according to a New Home Source Shopper Insights Panel survey. Focusing on those benefits can help realty pros market themselves to this group.
The New Home Source survey also found out what millennials want in a new home. The top five location-related preferences were proximity to everyday conveniences, performance of public schools, proximity to major highways, proximity to work or a major employment center and the presences of others like themselves.
The presence of older family members can also be a lure for renters to favor a further-out new home subdivision, says Lisa DeMaio, a Realtor at ERA Key Realty Services in Millis, Mass.
Combine a high-enough income and willingness to commute with having parents, grandparents or a childhood home in the area, and, DeMaio says, many renters find new construction attractive.
When price and location are set aside, Millennial buyers focus mainly on a home’s floor plan, financing options, the durability and quality of materials, quality of local schools and availability of standard features and upgrades, the survey found.
Highlighting these features in new home marketing is another way realty pros can entice Millennials to trade an apartment for a home.
Marcie Geffner is an award-winning freelance reporter, book editor and blogger whose work has been published by a long list of financial, mortgage and banking websites, trade magazines and newspapers.
She holds a bachelor’s degree in English with high honors from UCLA and a master’s degree in business administration (MBA) from Pepperdine University and has completed advanced novel-writing courses at the UCLA Extension Writers’ Program. She is a second-generation native and lifelong resident of Los Angeles.