Why is it better to buy directly from a developer?

By Maristella Arifi | Bricksave

July 08, 2024

News > Blog Article > Why is it better to buy …

Buying properties directly from the developer in the U.S. can offer several advantages, particularly when it involves avoiding Homeowners Associations (HOAs) and considering the impact on rental yields. Here's a detailed breakdown of why this approach might be beneficial: 

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1. Direct pricing and negotiations 

When you purchase directly from a developer, you're effectively cutting out any middlemen, such as real estate agents. This can lead to better pricing as there are no additional commissions that need to be factored into the sale price. Developers may also offer incentives to buyers, such as upgrades or closing cost assistance, to close a sale directly without competing offers from multiple buyers going through real estate agents. 

2. Customisation and choice 

Buying directly from a developer often allows buyers to select specific features, finishes, and even unit placements within a development before they are built. This level of customisation can be particularly attractive for buyers looking for a property that can meet specific aesthetic or functional requirements, enhancing both personal use and potential rental appeal. 

3. New property benefits 

New constructions come with the obvious advantage of modern designs and compliance with the latest building codes and energy efficiencies. They typically require less maintenance in the short to medium term, saving costs and headaches associated with older properties. This is especially relevant for rental properties, as maintenance costs can significantly impact the net rental yield. 

4. Avoiding HOAs 

One of the significant benefits of buying from a developer could be the potential to purchase property where there is no established HOA. 

Benefits of no HOA: 

• Lower costs: HOA fees can be substantial and are an ongoing cost that directly reduces rental yield. They are used to cover common area maintenance, amenities, and sometimes utilities, but for investors, these fees can eat into the profitability of the property. 

• Fewer restrictions: HOAs often have rules that can include restrictions on renting out the property, the type of tenants allowed, and even approval of tenants. Avoiding these can mean fewer hurdles and broader tenant selection for property owners. 

• Simplified management: Managing a property without an HOA can be simpler, with fewer administrative tasks, less paperwork, and no need to comply with HOA meetings or politics. 

5. Potential for appreciation 

Properties in new developments can sometimes offer excellent potential for appreciation. As the area develops and becomes more desirable, property values can increase. Buying early in the development phase allows investors to benefit from lower initial pricing and maximise gains as prices increase. 

6. Developer incentives 

Developers keen to meet sales targets often offer additional incentives which can include lower deposit requirements, discounts, or favorable financing terms. These incentives can significantly improve the investment's initial cost-effectiveness and long-term returns. 

7. Warranties and guarantees 

New constructions typically come with warranties that cover everything from appliances to structural issues for certain periods. This is beneficial for minimising unexpected expenses that could affect rental yields. 

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In conclusion, buying directly from a developer in the U.S., especially in developments without an HOA, can provide financial benefits, customisation, potentially lower costs, and fewer restrictions, all of which can enhance the attractiveness and profitability of a real estate investment.