Want to invest in real estate? Search for single family homes for sale as they make the best investment properties!
When you think of the real estate business, the first thing that might cross your mind is apartment buildings or other types of multi family homes. While these rental properties are good for making money in real estate, investing in single family homes is actually the better choice. Many successful property investors (who now are owners of multiple properties) started out with a single family home. There are many attractive characteristics to owning this type of rental properties. Let’s have a look at why every real estate investor needs to buy single family homes for sale.
#1 Easier to Manage
Property management is an important part of being a real estate investor, and the first reason we recommend single family homes for sale to beginners is that they’re easier to manage and maintain. Managing and maintaining multi family homes not only takes time but also a lot of money. On the other hand, it’s much simpler to focus on one tenant at a time rather than multiple tenants all at once. This also gives you the chance to do the right diligence and find the right tenant for your rental property.
Tenants of single family homes are also very stable. Most property investors lease out their investment properties for more than a year. Thus, they have a lower probability of vacancy risks and higher occupancy rates. In addition, you can state in the lease agreement that your tenants will be responsible for paying utilities, mowing the grass, and other simple maintenance tasks. Generally, tenants of such rental properties tend to take very good care of the property because they feel it’s their own home more than an apartment is. So, with a single family home, you don’t need to hire a professional property management company!
Want to start looking for single family homes for sale near you? Click here to use our property finder tool and find the best ones in a matter of minutes!
#2 High Appreciation
Appreciation means the increase of the value of investment properties the longer a real estate investor holds them. Historically, single family homes appreciate at a much faster and higher rate than multi family homes. A single family home for sale is valued on the supply and demand, while multi family homes are valued on rents and market conditions. Thus, the only way for a multi family rental property to appreciate is if rents were to rise, causing house prices to rise as well – but only if rents rise enough to meet the housing market’s rental rates, which is not something that could easily happen.
Single family homes for sale, however, are always in top demand meaning they sell much quicker and, in turn, have more liquidity. As a result, property investors have a higher chance of making long term profits when selling their investment properties in the future because single family homes appreciate faster than other types of rental properties.
#3 Unlimited Supply of Single Family Homes for Sale
As mentioned in the earlier point, single family homes are always in demand in any housing market. More than one-third of US rental properties are actually single family homes. Moreover, 52.4% of renters between the ages of 25 to 34 live in single-family homes, compared with 43.4% in apartments – according to research by Fannie Mae. Currently, the demand for single family homes for sale is, not surprisingly, at an all-time high and showing no signs of slowing.
For a real estate investor, this means countless investment opportunities! That’s because when a type of residential property is in demand, developers typically focus on meeting that demand with sufficient supply. So, property investors have better chances of finding this type of investment properties.
#4 Single Family Homes for Sale Are More Affordable
For beginner property investors, affordability is a concern. Since a multi family home consists of more than one unit, this obviously means these rental properties are more expensive than a single family home – which only hosts one family. Thus, for a first-time buyer looking to start a real estate investing business, buying a single family home makes much more financial sense. You might even find single family homes for sale below market value!
While someone might argue that renting out multi family homes generates higher rental income, you must remember that the down payments and monthly mortgage payments are higher for such rental properties. Not to mention the higher costs of maintenance and other expenses. It’s crucial for a real estate investor to understand every aspect of the property he/she wants to invest in to make money in real estate and see if the investment will be worth it.
#5 Provide Better Cash Flow Returns
In real estate investing, cash flow is the sum of the monthly rental income minus the monthly rental expenses. Single family homes are associated with fewer expenses than multi family homes. For example, landlords of multi family homes are sometimes responsible for paying utility bills which, ultimately, will add on to their rental expenses and cut into their cash flow returns.
On the other hand, covering these bills is the tenants’ responsibility in the case of single family homes. Also, as previously mentioned, property investors don’t necessarily need a professional property management company to manage a single family home, eliminating another cost – property management fee. With the stable rental income and fewer monthly expenses, single family homes for sale have a better chance of generating positive cash flow.
Note: You can compare the cash flow of different rental properties within the same area with our investment property calculator. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
#6 Can Be Passive Income Investments
Last but not least, investing in single family homes for sale can actually be an investment strategy to make passive income. By passive income, we mean the profits you receive without having to do any work for it. Even though you don’t need professional property management, hiring one will turn your investment property into a passive income generating machine. The company will do all the work for you, from finding a tenant to regularly checking and maintaining the rental property, while you sit back and reap the profits.
Investing in single family homes for sale is the best way to kick start your real estate investing career. If you’re ready to start searching for one, sign up with Mashvisor and make use of the tools we provide to find the best investment property in your city or neighborhood of choice across the US housing market. If you have questions about Mashvisor, click here to read our FAQs and learn about our tools.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.