Topic 6 of 8
New Construction Investment, Lehigh Valley PA: Northampton, Lehigh, and Carbon Counties.
The purchase price is only the start of the cost picture on a new build. Homeowners-association fees, landlord insurance, and the property-tax reassessment that lands once construction is finished can change your cash flow more than many first-time investors expect.
Review the items below against the specific property and community, because the dollar figures vary by location and by HOA.
The most commonly missed costs are homeowners-association fees and special assessments, landlord insurance, the property-tax reassessment after construction is finished, vacancy costs, and maintenance and capital reserves. HOA dues continue even when a unit is vacant, so they add to your carrying cost during any vacancy. Budget for all of them, not just the mortgage.
Yes. A standard homeowners policy does not cover a home that is rented out, so you need a landlord or dwelling-fire policy that covers the structure, tenant-injury liability, and loss of rental income. Failing to switch can result in a denied claim. Landlord policies generally cost more than an equivalent homeowners policy, so include the difference in your underwriting.
Many HOAs cap the share of units that can be rented or impose lease restrictions, such as a minimum ownership period before renting, board approval of tenants, or minimum lease terms. These rules are typically enforceable if written into the community's governing documents, so review the HOA covenants before you commit to a property you intend to rent.
In Pennsylvania, a newly built home is generally not reassessed until it is occupied, conveyed to a buyer, or certified as finished. Once one of those events happens, the county places an interim assessment on the new building, so the tax bill rises to reflect the finished home rather than the prior vacant-land value. That higher bill is a real cash-flow line item you should model before you buy.
No. Depreciation on a residential rental is spread over 27.5 years, and only the building and qualifying improvements are depreciated. Land itself is not depreciated because it does not wear out. You allocate your cost basis between land and building, and a qualified tax professional can help you set that up correctly.
The purchase price understates the true cost of a new build. HOA fees, landlord insurance, and the post-construction tax reassessment are recurring costs that belong in every cash-flow model.
Tell Tim what you are evaluating and he will help you underwrite it with current Lehigh Valley data. No pressure, no obligation.
Tim Tepes is a PA Licensed Associate Broker with 36+ years in the Lehigh Valley and 700+ documented transactions. He specializes in investment properties and small multifamily assets across Northampton, Lehigh, and Carbon Counties.
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Compiled by Tim Tepes, PA Licensed Associate Broker with 36+ years of experience helping investors succeed in the Lehigh Valley and beyond.
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