Buying an investment property in Merced isn’t just about price; it’s about strategy. One of the first decisions investors face is whether to go with new construction or an older home, and that choice can shape everything from rental demand to long-term returns. New builds promise modern features and fewer repairs, while older properties often offer better locations and value-add potential. So which one actually works better in Merced’s rental market?
At Rental Zebra, we’ve helped investors succeed with both. In this guide, we’ll break down the real advantages and challenges of new vs. old construction for investment properties in Merced, so you can make a confident, informed decision that aligns with your goals.
Key Takeaways:
- New construction offers fewer repairs, modern amenities, and higher rent potential, but often comes at a premium and may require additional landscaping costs upfront.
- Older homes may need more maintenance, but often provide higher land value, mature landscaping, and character that appeals to long-term tenants.
- Location, not just age, is crucial when investing in Merced properties.
- Understanding Merced’s rental market trends is key to choosing the right type of property.
- Working with a professional property management company can help maximize returns, no matter the property’s age.
The Case for New Construction in Merced
Modern Features That Attract Tenants
Tenants love convenience and newer homes usually come with energy-efficient systems, updated layouts, and tech-ready wiring that make them easier to rent. Open-concept kitchens, large closets, and modern safety standards are a major plus, especially for younger renters and working professionals.
Lower Maintenance Costs
New homes typically won’t need a new roof, HVAC system, or major plumbing repairs for at least a decade. That means fewer surprise expenses in your first few years as a landlord, always a win for cash flow.
Warranties and Builder Guarantees
One of the underrated perks? Most new builds come with warranties that cover major systems and structural elements for up to 10 years. It’s like insurance for your investment, especially if you're new to real estate.
Higher Initial Price but Possibly Higher Rent
New construction typically comes with a higher price per square foot, but in Merced, this does not always translate into higher rental income. Much of the local market rents by the room, meaning a well-maintained four-bedroom home often commands similar rent regardless of whether it’s new or older.
In practice, tenants tend to prioritize bedroom count, layout, and overall condition over the age of the home. New builds may even face rental friction if they lack finished landscaping or hardscaping, a drawback during Merced’s winter months. Additionally, required solar systems on new construction can increase ownership costs without directly increasing rent.
Potential Challenge: Some builders deliver large clusters of similar homes at once, which can create short-term rental competition. Investors should evaluate local inventory levels carefully to avoid entering an oversupplied submarket where rent growth may be limited.
The Charm (and Opportunity) of Older Homes
Lower Purchase Price, Higher Land Value
Older properties tend to have larger lots and lower purchase prices compared to new construction. That means better leverage and potentially more equity growth over time. In parts of Merced where land is appreciating faster than structures, this can be a goldmine.
Prime Locations
Many older homes are located in established neighborhoods near parks, schools, and shopping areas. These areas are often walkable, well-connected, and appealing to long-term tenants who value a sense of community over trend-driven features. Mature tree-lined streets, charming custom homes, and larger, landscaped yards further enhance the appeal and contribute to tenant retention.
Value-Add Opportunities
Older homes often offer strong value-add potential through cosmetic upgrades like new flooring, updated appliances, or minor kitchen and bath improvements. Many older lots in Merced may also support ADUs or Junior ADUs, which, when feasible, can significantly improve cash flow and overall ROI.
In our experience, many Merced investors purchase older homes below market value, invest around $20,000–$30,000 in targeted upgrades, and significantly improve rental income, sometimes by double digits.
Potential Challenge: Maintenance. Electrical, plumbing, roofing, and HVAC systems in older homes can be a mixed bag. Unexpected repairs are common, and some homes may not meet current code. Be sure to conduct thorough inspections and set aside reserves.
Merced Market Snapshot: What’s Trending?
Merced is growing. Thanks to UC Merced’s expansion and major regional infrastructure projects, the city is attracting both families and young professionals. New construction is booming on the outskirts, while older neighborhoods continue to hold substantial rental value.
Key rental hotspots:
- North Merced (newer homes, popular with families and student renters)
- Central Merced (established neighborhoods with strong location appeal for professionals)
- South Merced (up-and-coming areas with affordable entry points and convenient freeway access)
- Regardless of property age, homes located near transportation corridors, quality schools, and commercial centers tend to perform well in Merced’s rental market.
Regardless of age, properties near transportation, good schools, and commercial centers tend to perform well.
Questions Investors Ask (FAQs)
Q1: Do new homes appreciate faster than old ones in Merced?
A: Not necessarily. Appreciation is more tied to location and market demand than the age of the home. Newer homes might command higher initial prices, but well-located older properties can outperform in the long term, especially if updated.
Q2: Is it harder to get financing for older properties?
A: It can be. Lenders may request more detailed inspections or repairs before closing. However, with the right financing team and documentation, it’s rarely a deal-breaker.
Q3: Which is better for cash flow, new or old construction?
A: Older homes may offer better cash flow due to lower mortgage costs, but they come with higher maintenance risks. New homes offer lower maintenance, but often with slimmer margins upfront. The correct answer depends on your goals: immediate cash flow or long-term growth.
Q4: What kind of tenants prefer new vs. old homes?
A: Students and young professionals often seek new builds with modern amenities. Families and long-term renters may prefer older homes in quiet, established neighborhoods.
Q5: Should I renovate an old home or just buy a new one?
A: Renovations can yield excellent returns if you have the right contractor, budget, and time. But if you’re hands-off or want a turnkey investment, new construction may be a better fit.
Final Thoughts: It’s Not Just Age, It’s Strategy
There’s no one-size-fits-all in real estate investing. New construction shines when you want ease, low maintenance, and young professional appeal. Older properties win on land value, character, renovation potential, and family draw.
The best investment property in Merced? It’s the one that aligns with your financial goals, time commitment, and risk tolerance.
Here’s the truth: Whether you're looking at a shiny new build or a fixer-upper with good bones, having an expert on your side is what makes the real difference.
Ready to Build Your Portfolio in Merced?
At Rental Zebra, we help investors like you make smart, data-driven decisions, whether you’re buying your first rental or expanding a growing portfolio. Our team understands the local Merced and surrounding market inside and out, and we’re here to help you find, lease, and manage properties that perform.
Get a free consultation today or explore our property management services on our website. Your next great investment might be closer than you think.
