How much do tenants care about neighborhood amenities?

Rehabbing, Fix and Flip, Rental Properties
1

Hi all,
I am considering two different neighborhoods. One had lots of amenities with multiple pools, ponds, and a parks. The HOA is $455/year and the house itself will cost a good $10k more. The other neighborhood is new and there is no pool or any amenity planned. HOA is $190/yr.

I’m torn from a cost perspective and a location perspective. If renters don’t care as much about neighborhood amenities the choice is a no brainer especially if the difference in rent I can command is less than $50. But I can’t tell for sure since there are no rentals in the new neighborhood yet.

Don’t know if this info helps, but I plan on buying this house to live in for a year or two and then rent it out when I move.

2

Amenities matter, but not that much.

I would primiarily pick the neighborhood that has the best potential for appreciation of rent and property value. If you do not know your local market good enough to make that decision yourself, I would consult with a local real estate agent.

You want a place that’s “in demand” to live in, and has great schools.

A neighborhood put side by side with another, that has a community pool, probably would be in more demand than one that is not. So the community pool option is definitely something that would help.

But - on a MIDDLE OR UPPER INCOME RENTAL, which this sounds like it is - other factors that I see that would affect your rental rate AND also your resale value are:

  • The quality of the schools (the #1 factor)
  • Demographics of the occupants/owners
  • Income of the occupants/owners
  • The design of the houses on the inside
  • The design of the houses on the outside
  • Number of bedrooms
  • Commute time to the nearest major city
  • How the neighborhood is maintained
  • Specific designs of your house (a flat, average sized lot that’s a 4/3 would rent faster than a house with a massive, sloped front yard that’s a 3/2)
  • The quality of the city - ie good city & police services, not too many low income apartment complexes, a decent overall appearance, etc
  • Proximity to shopping, entertainment, etc
  • Being near a body of water - the ocean, or a lake (I own two lakeside properties…whoo hoo)
  • Among a few other basic factors…

Let’s take two comparable houses in suburbs near Dallas, Texas - as an example.

A 5 year old 3/2 house in Garland, Texas might rent for $1200 a month and sell for $140,000. The town is OK, but the schools are not the most desirable around. it’s not a bad place to raise a kid, but not exactly “the place to be” either.

While a 5 year old 3/2 in central Plano, Texas might rent for $1900 and sell for $225,000. It’s not so much that the houses are different…but the factors like I mentioned above have caused Plano to have higher property values than average in the Dallas/Fort Worth area.

5 years ago, the person who bought the 3/2 in Plano probably paid a lot more for the house than the guy in Garland, as Plano has been “in demand” since the mid 1990s. However if you can find the right neighborhood that is up & coming, and if both of the above houses were bought say 20 years ago, the guy who bought in Plano might of gotten a house for a similar price to the guy in Garland…and many years later would be benefiting from the much larger appreciation in both his property value, and his rent (assuming he rented the place out).

Hopefully that’ll help you some.

3

Are you buying it as an investment or on emotions because losing $10K plus another $150 a month to earn $50 a month sounds crazy to me. If you’re basing both choices on market rents, buying a property with a pool and a park without any positive net returns is a strategy for failure. Who cares if it has a pool and a park?? If it doesn’t give you a return on your investment, it’s not an investment and you’re on the wrong forum. Maybe you should join the lifestyle or vacation forum.

4

It’s $250/yr for the higher HOA dues plus the extra pament on 8k worth of prrincipal and $2000 up ffront, assuming 20% down. I figure 2k up front and $50/month.

I would pick the one that is easier to rent and sell. In nicer rentals the criteria for homebuyers and renters are the same. I assume the nicer one with the communit pool would be a nicer rental property and rent for higher. It’s just like anythign else - check the comps.

5

Whoa, I just noticed that. $455 a year is really cheap for a house in a subdivision with “multiple pools, ponds, and a parks”. My dad used to own a house in a private subdivision and paid 2 grand a year in HOA dues and he was still expected to volunteer a lot of hours to the association. At $455 a year, how many hours would you be expected to volunteer?? Who’d want to volunteer their time like that for a house?

6

To update:
The lot in the subdivision with lots of amenities sold less than 24 hours after I saw it. So that one’s gone, lol.
I did decide to ahead with building a new house in the other subdivision (both fed into the same schools which are excellent). It’s actually a great price for a new home in the area, especially considering there are but a few ‘older’ homes (< 2000) for sale for close to the same price. This should mean less in maintenance costs overall and hopefully attract a higher quality tenant. Also, in speaking with some neighbors, the homeowners are taking over the HOA from a management company and are looking to put up a park in the neighborhood. So that’ll be something :slight_smile:

Thanks for all the input!

7

I have to ask,can’t you find a "not brand new’ house in the same area and save a lot of money?

I’ve never thought about a brand new upscale house for a rental,I can’t imagine the numbers working

8

Since the builder is paying closing costs and giving me $15,000 in free upgrades, there are only a few houses that come close in cost considering I’d have to pay for repairs and at least partial closing costs. The difference is less than $5000 which I’m willing to pay to have a house that is 10 years newer with the new post-tension slab foundations and warranties. True, I won’t be raking in the money cash flow-wise, but the numbers still worked out well. I’m hoping to keep this one for a long time so it’s more of an appreciation/equity-payoff play.

9

he’s building the house for himself for the first couple of years and that makes a difference.

My experience with renters is that they like amenities but don’t want to pay more to get them. They will rent the house with the park before they will rent the house without, but they won’t pay higher rent to get it.

So, it helps to keep your place fully rented, which is worth money, but it doesn’t get you more rent.

My worry with a community pool is that it will attract renters with large numbers of unruly kids. While I must accept children, I would prefer not to extend children a special invitation.

The top school in the area will get you a very few renters who are willing to pay more to get into that school district. With parents who are super concerned about the school, those kids are usually pretty well supervised.

With a regular good school, parents might want to be in that district, but if there are enough rentals available in the district, they won’t pay more rent to you.

10

I would say it is really up to the type of tenants you have but most will care quite a bit, especially if they are married or have kids.

Also, if the amenities would include lawn care that they didn’t have to do or a gym or pool they can use for free instead of having to drive and pay to use elsewhere, this can definitely save them money every month and you can show this when discussing what they will get in regards to the cost for renting every month.