With new construction, usually the only person to make money is the builder. Even the second owner often loses money. The problem with new construction is that you are paying based on current wages and current prices of materials. Inflation increases the costs of each of these over time. So an older square foot costs less than a new square foot.
Tenants will usually, but not always, prefer lower rent to new construction, as long as your property is well maintained. With a new property, there is no possibility for profiting from another seller’s mistakes. With an older property, you can buy a repo. Or get a bargain because the seller needs to sell quickly and can still make a profit because he or she bought years ago for much less than current values.
I prefer properties that are about 40 years old. After 1977 or so, you are past asbestos, lead paint, knob and tube wiring, underground oil storage tanks, and a lot of other big problems. You usually only have cosmetic repairs to do.
You want to avoid any environmental problems like the plague. With environmental problems, such as underground storage tanks, every owner under the sun is usually jointly and severally liable for any environmental cleanup even if they did not cause the environmental problems, unless they performed an appropriate inspection. Do not buy a gas station without a thorough inspection! You probably do not want to buy a gas station at all. Or any contaminated property unless the fixed up value minus the purchase price exceeds the cleanup cost. If you must buy one, definitely use a corporate entity and observe all formalities. Similarly, be very careful with residential properties that have underground storage tanks. Houses with lead paint need special painting techniques. Removed asbestos needs to be disposed in special dumps.
With turn of the century properties, you may have foundation problems, lead pipes, old wiring, bad sewer pipes, environmental issues like asbestos, and all sorts of problems that are hidden in the walls. Fixing these problems can cost significant sums of money without resulting in any increase in value (because they are not visible improvements). If your house has knob and tube wiring (it is not uncommon for sellers to update the circuit breaker box but leave some old wiring in the walls because it is too hard to reach), you may not be eligible for conventional insurance.
After about 1960 or so, lead paint stopped being used although all pre-1978 housing is suspect. If you buy a property that is pre-1978, you have to give lead paint brochures to your tenants and will want to get them to sign a receipt acknowledging that they received the brochure. But the bigger problem is that you have to use new special procedures to paint the property, including tenting around the house. This increases the cost of painting.
But keep in mind that just because your property is pre-1978 does not mean that it has lead paint. With 1960s or later, there is a good chance you do not have lead paint. It is possible to test for lead paint during the inspection period. An inspection by an environmental expert may help you avoid the need for the special painting techniques and need to give lead paint brochures to tenants.
Regardless of what age you prefer, when buying, compare rental yields of similar age properties. Your yields will, of course, be lower for properties built in 2000 than properties built in 1900. Risk is higher with older properties and maintenance costs will also be higher. Insulation will be poorer and utility costs will be higher. Price per square foot will also be lower with older properties. So when evaluating if a property is a good deal, compare price per square foot and cap rate with properties of similar age, area, and condition. The last one gets tricky with older properties because there is a wide range of possible conditions.
You can reduce risks as well as the effects of this last issue (wide range of possible conditions) by buying post-1978 properties in suburban subdivisions. In subdivisions, there are typically many houses of the same age, built by the same builder, with similar designs and sizes. This makes it very easy to find proper and relevant comps.