Jim Dahle and others discuss how long new construction investment properties hold up, covering maintenance costs and tenant damage over 7 to 10 years. They explain what breaks first and when you'll need major repairs.
Jim, one of the unique things you do at Southern Impression Homes is you build from the ground up. I mean, you're building these properties and the first owner is the investors here and the first, you know, tenant is the people you're putting in there for.
Yes.
When you do that, starting from the beginning with all new stuff, how long should people really expect before they're going to need to put significant capital into these properties? I mean, roofs wear out, air conditioners, ovens, microwaves, fridges, water heaters, all that stuff wears out eventually. How long should they plan before they're going to need to be bringing capital to put into these properties?
That's a great question, Jim. So there again, we all know there's a big difference between structural and cosmetic. So structural. Let me tell you a little number we always look at for our people. If you buy a new construction home with us and you decide to sell the next seven to 10 years and you're listing it with a retail agent from your experience, Jim, if a new home buyer comes in, a first time home buyer and says, ooh, I want to buy this house and it's only 10 years old, normally you're not going to have to do anything. You know, if you sell a house that's within 7 to 10 years old, most first time home buyers will say, wow, that's great. I don't, there's not much I have to do here, I'll take it over. This is a newer home. So again a lot of people sell properties within seven to 10 years. I like to look longer term. But from what we see, besides cosmetics, if you're selling properties forward in seven to 10 years of the structural, you should not have to do much to the property. And from what we're seeing, Jim, overall in the first few years there's very little maintenance to our properties because the way we design them. But then even so, we found that our new construction model compared to our old fix up properties, those maintenance repairs are about 70% less. So we feel the first three to four years there really should be very little to nothing unless there's tenant damage that obviously we can go back to the tenant for, but there should really be not much at all. And then for the way we build it, we're looking to avoid any structural stuff for at least the first 10 years. So when you're saying significant a roof, again, we're saying a roof can cost a lot of money. We haven't had with our 10 year span now roofs running out of life. Unless there was some sort of tree fell on it or something. And that's when insurance gets involved. But at this time, we're looking out 10 years on the structural stuff in the first few years. You really shouldn't have much maintenance or repair in those first few years. Again, that's why we went to new construction. We've really seen that plummet compared to our old house model.
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