About one in three homes selling in the New Braunfels, Texas area right now is new construction. For investors, that raises a practical question: if so much new inventory keeps coming online, how long do you need to hold a property before it has room to appreciate?
Yitzchak Pierson, a Broker Associate with eXp Realty who works with investors along the I-35 Corridor, says the high volume of new construction does limit short-term appreciation. His advice is to plan for a long hold from the start.
When a large share of sales in a market is brand-new homes, anyone reselling a recently built home competes directly with builders. Builders can offer incentives, rate buydowns, and warranties that an individual seller usually cannot match. That competition makes it hard for a home bought new to sell for much more a few years later.
“I try to tell all of my investors that they need to hold on to the properties for a minimum of five years,” Pierson says. “Preferably seven or 10 years is going to be better for appreciation.”
Pierson compares buying new construction to buying a new car. The value drops once you take ownership, and it takes time to recover.
“It’s like driving a car off the lot,” he says. “There’s an immediate depreciation that isn’t going to catch up for at least five to seven to 10 years.”
This does not make new construction a poor investment. It means the investment works best for buyers who do not need to sell soon. Pierson says the greatest risk comes from life events that force a sale in the first few years, such as a job change, a divorce, or an unexpected expense. In those cases, “there’s not going to be a lot of room for the appreciation of the property to have taken place.”
Pierson points to recent sellers as a warning. Many homeowners in the New Braunfels market bought in 2022 and 2023, when prices peaked. Now some need to sell, and they are finding little or no equity.
“They have no appreciation in their home, and they have little equity because they put very little money down,” he says. The market has been leveling out since then, and owners who put little down have almost nothing to show for the time they owned the home.
For investors, this shows what happens when a short hold meets a flat market. A small down payment, combined with a quick exit, can leave you breaking even or bringing money to closing.
Many of Pierson’s investor clients use a buy-and-hold strategy with a much longer horizon than five years. Some plan to own a property for 20 or 30 years.
“Even if you’re not purchasing cash, you’re purchasing with a loan, the goal is to buy and hold the property for 30 years,” he says. “After those 30 years, when your mortgage is paid off, you’re just getting cash flow rather than having to pay down principal on the loan.”
Before buying new construction as an investment, Pierson suggests asking a few questions:
Can you hold this property for at least five years, even if your circumstances change? Do you have cash reserves to cover a vacancy or repair without being forced to sell? Is the rent likely to cover your mortgage and costs during the years when appreciation is slow? And what is your plan if you need to exit early?
“Real estate investing is a long-term investment,” Pierson says. “There’s a lot of potential with new construction, but there is that risk.”
Investors with questions about hold periods, financing, and builder incentives can find more information on Pierson’s FAQ page.
Yitzchak Pierson is a Broker Associate with eXp Realty in New Braunfels, Texas, serving buyers, sellers, and investors across the I-35 Corridor, including Canyon Lake, San Marcos, and Seguin. He has been named Best Real Estate Agent in New Braunfels three years in a row and hosts the YouTube channel Living in New Braunfels.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.
AI tools assisted in creating this article. An editor reviewed and fact-checked it against the source interview before publication.
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