Are you naturally drawn to sleek new developments or captivated by older buildings’ character when looking at apartment investing? The real estate market shows a growing trend toward investing in older properties. New apartments typically get pricey compared to properties that are decades old.
Each option’s benefits and drawbacks go way beyond the reach and influence of what meets the eye. Older apartments feature spacious layouts and sit in established neighborhoods close to everything you need. They also give you a great chance to add value through renovations and upgrades. These buildings might lack modern amenities and energy-saving features you’d find in new construction. Maintenance needs pop up more often and can get pricey.
Smart apartment real estate investing needs you to factor in these basic differences. You’ll find everything about what sets old and new apartments apart in this piece. The analysis covers financial impacts and what savvy investors look at before they commit. This guide helps you make smart choices that line up with your investment goals, whether you’re looking at single units or entire apartment complexes.
Old vs New Apartments: Key Differences at a Glance
The basic differences between old and new apartments help investors make smart apartment investing decisions. Let’s get into what makes these properties different and how they affect tenant appeal and long-term returns.
1. Size, layout, and design features
New and old constructions show a clear difference in square footage. The average size of new apartments dropped to 887 square feet in 2022, which is 54 square feet less than in the last decade. Studios took the biggest hit and shrank by 54 square feet in just ten years. Old properties give renters more space at similar prices.
Old apartments charm renters with their unique architectural features. High ceilings, detailed woodwork, and large windows showcase character and craftsmanship. New developments take a different approach with open-concept designs that blend kitchens, dining, and living areas into one flowing space.
2. Location and neighborhood maturity
The choice between old and new properties often comes down to location. Old apartments sit in neighborhoods that are decades old with easy access to transportation, quality schools, medical facilities, and retail venues. These buildings helped shape urban growth and now stand in sought-after areas surrounded by parks, shops, and thriving communities.
New developments pop up more in emerging neighborhoods. They offer more space but often mean longer commutes. To name just one example, Dallas saw a boom in apartment construction with over 55,000 units going up in suburban areas like Allen, McKinney, Frisco, and Denton.
3. Construction quality and materials
Construction quality creates interesting contrasts for apartment complex investing. Old buildings used materials like old-growth lumber, which beats today’s younger timber in strength and straightness. Many historic properties boast load-bearing masonry walls and plasterwork that last longer than modern materials.
Modern apartments follow updated building codes and use safer materials. However, today’s construction focuses on speed and affordable solutions rather than craftsmanship. This approach might lead to higher maintenance costs down the road.
4. Amenities and modern conveniences
The biggest difference shows up in amenities. New developments pack impressive shared features like fitness centers, rooftop lounges, smart home systems, and energy-efficient appliances. Austin proves this trend – 56% of new units built in 2024 came with eco-friendly features like water-saving technologies.
On top of that, new properties now include amenities that match today’s lifestyle. Coworking spaces, electric vehicle charging stations, and strong Wi-Fi networks meet the changing needs of residents.
Advantages and Disadvantages of Investing in Old Apartments
Savvy apartment real estate investing professionals must carefully assess the unique opportunities and challenges of investing in older apartment buildings. The financial aspects of these properties work quite differently from newer buildings.
1. Lower purchase price and larger space
Older apartments give buyers a great entry point, with prices 20-30% lower per square meter than new construction. These buildings offer more generous floor plans. The variety of styles and architectural periods creates investment options at different price points.
2. Renovation potential and value-add opportunities
The value-add strategy stands out as one of the biggest advantages when apartment building investing in older properties. Renovated units can boost rental income by 10-30%, which creates substantial returns. CBRE reports show value-add multifamily properties have delivered average annual returns of 12%, beating stabilized properties at 8%. Smart upgrades to kitchens, bathrooms, and energy systems can boost both property value and tenant appeal.
3. Higher maintenance and repair costs
The lower purchase price comes with higher ongoing expenses. Census Bureau data shows pre-1950 property owners spend about $1,800 yearly on upkeep. New owners spend substantially more—around $3,900 per year. Old plumbing, electrical systems, and structural elements need frequent repairs. The original savings often get eaten up by these higher long-term operating costs.
4. Legal and documentation challenges
Older properties come with complex documentation issues that can affect investment success. Problems include unclear ownership records, property boundary disputes, and historical preservation requirements. Tax considerations become crucial when deciding which expenses count as deductible repairs versus depreciable improvements. A full due diligence check before purchase helps identify potential issues with property documentation, permits, and compliance history.
Advantages and Disadvantages of Investing in New Apartments
New construction apartments have unique investment features that work well with specific apartment investing strategies. These properties go beyond just looking good – they come with special financial aspects that deserve a close look.
1. Modern amenities and energy efficiency
New apartments combine smart home technology like keyless entry and smart thermostats that draw tech-savvy tenants who will pay more rent. Energy efficiency in newer buildings saves money too, with new-build energy bills costing 57% less than older properties. This adds up to £1,685 in yearly savings. The savings come from better insulation, high-performance windows, and advanced HVAC systems.
2. Lower maintenance in early years
Quality construction materials and methods in new developments mean fewer repair headaches right away. Investors spend less on operating costs early on because everything from plumbing to heating systems starts out in perfect shape. While maintenance isn’t completely gone, major repairs usually won’t be needed for quite a while.
3. Higher upfront cost and smaller layouts
New apartments cost more because of their modern features. Better insulation, high-performance windows, and strong electrical systems push up the original costs. New units also tend to be smaller, averaging 908 square feet in 2024. In spite of that, this size actually shows an increase from recent years, which goes against the trend of shrinking apartments over the last decade.
4. Risk of construction delays and depreciation
Construction delays are one of the most important investment risks, with projects running about five months behind on average. Each week of delay means lost income plus ongoing construction loan expenses. The good news is that new properties are a great way to get cost segregation tax benefits since more of their assets qualify for faster depreciation.
What Smart Investors Consider Before Choosing
Apartment investing success depends on many factors beyond a property’s age. Smart investors look at several aspects to get the best returns.
1. Apartment complex investing vs. individual units
Multifamily properties cost less per unit and benefit from economies of scale. You can manage multiple units in one property more efficiently than similar single-family homes. The cash flow stays reliable with multiple income streams, even when a couple of tenants move out.
2. Evaluating long-term rental yield and tenant appeal
Prime locations with older apartments yield better returns (5.0-6.5%) than new construction (4.0-5.5%). The current nationwide vacancy sits at 6.4%. Luxury apartments show 7.8% vacancy while B/C-class properties remain at 5%. Location convenience makes tenants willing to pay 15-20% extra.
3. Understanding tax benefits and depreciation
The Modified Accelerated Cost Recovery System lets residential rental properties depreciate over 27.5 years. Cost segregation studies help speed up depreciation. These studies separate personal property from building improvements and recover furniture and fixtures in just five years.
4. Financing options and loan eligibility
Loans for investment properties usually need 15-20% down and credit scores in the high 600s or 700s. Most lenders include 75% of predicted rental income when they calculate qualifying income.
5. Resale potential and market trends
Multifamily cap rates have jumped 60-100 basis points since Q3 2022 as buyers adjust their leveraged return expectations. Housing supply needs substantial growth since affordability remains the biggest challenge nationwide.
Conclusion
Your success in apartment investing depends on finding the right balance between property age and investment goals. Old and new apartments come with their own sets of advantages that work for different investment strategies.
Older properties offer great opportunities to add value through strategic renovations. Their time-tested locations provide stability and steady tenant demand. In spite of that, you should think about higher maintenance costs and potential legal issues before investing your capital.
New developments draw tenants who will pay premium rents for modern amenities and energy efficiency. The higher purchase prices and smaller layouts can affect your initial returns. Construction risks and changing neighborhood dynamics create variables that seasoned investors must assess carefully.
Smart investors look beyond just how old a building is. Your focus should be on fundamental metrics like cap rates, cash flow potential, and long-term appreciation prospects. The most profitable deals often mix elements from both worlds – take an older building in a prime location with upgraded systems and amenities.
The best strategy for you comes down to your investment timeline, risk tolerance, and management skills. You might prefer older properties with charm and value-add potential or new developments that run efficiently from day one. Either way, thorough due diligence is crucial.
Note that real estate success comes from careful analysis rather than getting emotionally attached to any property type. Once you weigh these factors, you can make investment decisions that match your financial goals and navigate the apartment market confidently.
