New Construction Rental Property: The Numbers to Run

A new home can make a solid rental if the numbers hold. Here are the loan, tax, insurance, rent, and depreciation rules to run first in SC and NC.

A new construction rental property is a newly built home you buy or build to lease, not to live in. The numbers that decide whether it works are the all-in price, the investor loan terms, the property tax at the non-owner rate, insurance written for a rental, and the rent a lender will count. Start with the homes available now and run each number below before you sign.

Investors often weigh a new home against an older one. A new home costs more up front and needs less work early. The rest of the math is the same rule set any rental faces, applied to a home with no operating history.

The numbers that matter on a new construction rental property

Put these on one sheet before you compare homes:

All-in purchase cost. Contract price, options, closing costs, and, on a build, land and carry.
Down payment and loan pricing. Conventional investor loans cap leverage at 85% and add a loan-level price adjustment.
Property tax at the rental rate. In South Carolina, a rental is assessed at 6%, not 4%.
Insurance. A rental needs a dwelling or landlord policy, and flood coverage is separate.
Qualifying rent. Fannie Mae counts 75% of gross rent, not 100%.
Reserves. Vacancy, turnover, and repairs after the warranty ends.
Depreciation. Only the building depreciates, over 27.5 years.

Purchase price: what is in the number

A new home has no prior owner and no repair credits to negotiate. The price is set by the builder. Red Cedar Homes sells at a stated price, with options priced before contract, so the number you underwrite is the number on the agreement.

Ask three questions about any new home price:

What is included? Appliances, window coverings, landscaping, and fencing are where rental budgets slip. A tenant expects a working kitchen and a usable yard on day one.
What are the closing costs? Lender fees, title, and prepaid taxes and insurance are cash you need on top of the down payment.
What is the completion date? A home still under construction earns no rent until it is finished and leased.

If you build instead of buy, the price splits into land and construction. In a fee build on a fixed vertical price, you buy the lot separately, the house is priced in three lines, and you carry the land during construction. Count that carry as part of your all-in cost.

Financing an investment property: down payment and loan pricing

Two common options are a conventional investor loan and a DSCR loan. Fannie Mae publishes its conventional rules, so start there.

Maximum loan-to-value

Fannie Mae's Eligibility Matrix dated August 5, 2026 sets these maximums for an investment property underwritten through Desktop Underwriter:

Purchase, 1 unit: 85% LTV, so at least 15% down.
Purchase, 2 to 4 units: 75% LTV.
Cash-out refinance, 1 unit: 75% LTV.

Loan-level price adjustments

Fannie Mae charges a loan-level price adjustment on investment property purchase loans. On its matrix dated September 30, 2026, the adjustment is 2.125% of the loan amount at 70.01% to 75% LTV, 3.375% at 75.01% to 80%, and 4.125% at 80.01% to 85%. Ask your lender how it shows up in your rate or points.

For illustration only: on a $400,000 home, 15% down means a $340,000 loan and a $14,025 adjustment at 4.125%. Put 25% down and the loan is $300,000 with a $6,375 adjustment at 2.125%. A larger down payment changes the pricing, not only the payment.

The rent a lender will count

Fannie Mae's Selling Guide section B3-3.8-02 calculates subject property rent as gross monthly rent times 0.75, minus the home's full payment (principal, interest, taxes, insurance, and association dues). The rent comes from an appraiser's comparable rent schedule (Form 1007) or a lease. If you have less than 12 months of rental management experience, positive rental income can only offset the home's own payment.

For illustration: if Form 1007 shows $2,400 a month, the lender counts $1,800. If the full payment is $2,100, the $300 shortfall goes into your debt-to-income ratio.

Property tax on a rental in South Carolina and North Carolina

Property tax is the line investors most often underestimate on a new construction rental property, because the last bill on a new home may reflect only the lot.

South Carolina: a home that is not your legal residence is assessed at 6% of fair market value under S.C. Code § 12-43-220(e). The 4% rate requires owner occupancy and is lost if the home is rented more than 72 days in a calendar year. Read how the South Carolina 4% and 6% rates work before you budget.
North Carolina: property is assessed at its true value under N.C.G.S. § 105-284. The statute sets one assessment standard for all property. North Carolina has no general owner-occupant ratio like South Carolina's 4% to lose when a home becomes a rental.

An illustration in each state

Greenville County's 2025 millage sheet lists 331.5 total mills for district 500, inside the City of Greenville. A $400,000 rental there is $24,000 assessed (6%), times 331.5 mills, or about $7,956 a year. In Mecklenburg County, the FY2027 county rate is 49.27 cents per $100, about $1,971 a year on $400,000 of assessed value, before the city or town rate is added. Pull the rate for your exact district.

Reassessment cycles differ too. South Carolina counties reappraise once every fifth year (§ 12-43-217). North Carolina counties reappraise at least every eighth year, and may choose a shorter cycle (§ 105-286).

Insurance for a rental home

A policy written for an owner-occupant is the wrong policy for a tenant-occupied home. The North Carolina Department of Insurance describes dwelling policies for rental and other non-primary homes in three forms:

DP-1, basic: named perils, settled at actual cash value.
DP-2, broad: more named perils, typically settled at replacement cost.
DP-3, special: open perils on the building, subject to exclusions.

The same page notes that dwelling policies typically do not include liability coverage, so price liability separately. Flood is separate as well. FEMA states that most homeowners insurance does not cover flood, that a new NFIP policy typically has a 30-day waiting period, and that flood insurance is required in high-risk flood areas on government-backed mortgages. Check the flood zone before you make an offer.

Reserves, repairs, and the warranty

A new home's systems start at year zero, so early repair costs are usually lower. They are not zero. Plan for:

Vacancy and turnover. Cleaning, paint touch-up, and lost rent between tenants.
Warranty claims. Get the written warranty, its term, and how claims are filed. Red Cedar's fee-build price includes a one-year limited warranty.
Repairs vs. improvements. IRS Publication 527 lets you deduct repairs, but requires you to capitalize improvements that better, restore, or adapt the property.

Depreciation on a new rental

IRS Publication 527 depreciates residential rental property over 27.5 years under the general system. You cannot depreciate land. When you buy land and building together, you divide the cost between them, and you may use the assessed values for real estate tax purposes if you are unsure of fair market values.

Depreciation begins when the home is placed in service, meaning ready and available for rent. For illustration: if $80,000 of a $400,000 purchase is land, the $320,000 building basis yields about $11,636 a year.

Ways to own a new home as a rental

Buy a move-in ready home. It is finished, so it can be leased soon after closing. Browse Curated Homes on individual homesites, many of them quick move-in.
Buy a home under construction. You lock a price and plan but carry no rent until completion.
Fee build. You own the lot and the house. On a Red Cedar fee build, the options are to sell with your agent or Red Cedar's, lease through Red Cedar Homes, or hold.

For a broader comparison of age and condition, read new construction vs. an existing home.

Frequently asked questions

Is new construction a good rental property investment?

It depends on your numbers, not the age of the home. A new home usually needs fewer early repairs and has a warranty, but it costs more up front and has no rent history. Underwrite it at the rental tax rate, investor loan pricing, a lender's 75% rent factor, and dwelling insurance, then compare it with an older home on the same terms.

How much do you need to put down on a rental property?

On a conventional loan for a one-unit investment property, Fannie Mae's maximum purchase LTV is 85%, so at least 15% down. Two to four units cap at 75% LTV. Loan pricing improves as LTV drops: the investment property adjustment falls from 4.125% at 80.01% to 85% LTV to 2.125% at 70.01% to 75%.

Do I pay the 4% property tax rate on a rental in South Carolina?

No. The 4% ratio is for an owner-occupied legal residence and is lost if the home is rented more than 72 days in a calendar year. A rental is assessed at 6% of fair market value under S.C. Code § 12-43-220(e). Budget your South Carolina rental at the 6% rate.

When can I start depreciating a new rental home?

When it is placed in service, meaning ready and available for rent, according to IRS Publication 527. That can be before a tenant moves in. Only the building depreciates, over 27.5 years for residential rental property. The land portion of your cost is never depreciated, so allocate it carefully.

Talk to an expert

Red Cedar Homes builds in Charlotte, Greenville, and Spartanburg. See the homes available now and the Curated Homes on individual homesites, then talk to an expert about the plan and price that fit your rent comps. Call 980-890-9381.

Sources

Figures as of October 2026. This is general information, not legal or tax advice. Talk to your attorney or CPA about your situation.

Buying New Construction as a Rental: The Numbers That Matter