It’s often recommended to beginning investors, and all investors for that matter, that they should be investing in single family homes. And once you find out how investing in single family homes could be very profitable, you’ll understand why. Here are the reasons why you should be investing in single family homes.
1.) The Time is Ripe
Never has the time been so great for investing in single family homes. In 2016, it was estimated that well over 1.25 million homes would be formed in the U.S. The number has remained high for 2017. And with trends such as more people turning to renting properties rather than owning them, single family residences (SFRs) are gaining more traction.
Also, vacancy rates have hit historic lows in recent years. This is important for you as an investor, increasing the likelihood that your tenants will remain in the property and not move out. The low vacancies apply to all properties, and its effect is additive on SFRs. Why? Well, single family homes generally have high occupancies to begin with! So, as a result, even higher occupancies are expected for single family homes.
More demand plus high occupancies is an easy formula for high rental income. But these two factors aren’t the only reasons why it’s the best time to invest in SFRs.
2.) Cheaper Property Prices
Single family homes tend to be cheaper than other properties, like multifamily homes. Even when important factors such as area, maintenance, and age are held constant, single family homes are set at lower prices. The main reason this is the case is that SFRs are simply smaller than some other properties (such as multifamily homes).
The lower prices of SFRs can serve as a great incentive for investors. Since single family homes are cheaper than other properties, they are often easier to purchase. Lower prices also mean that obtaining a bank loan becomes easier. This is great for all investors, but young investors in particular. By investing in single family homes, younger investors find a great opportunity to get involved in real estate.
3.) Little Headache with Tenants
Tenants are obviously a key in the success of a real estate investment. At times, though, tenants can butt heads with investors, something all investors would like to resolve. By investing in single family homes, however, as many experts claim, you are more likely to deal with good tenants. Not only are tenants less likely to have issues with the investor, but since SFRs accommodate only one tenant at a time, tenants can’t fight with each other. Overall, SFRs attract high quality tenants.
As previously mentioned, single family homes have high occupancy rates. The reason for this is that tenants tend to remain in a SFR longer, treating it as their home. And since tenants will treat the properly respectfully and carefully, there is less damage done to the property. Little headache, high occupancy, and tremendous care for your property. What more could you ask from a tenant?
4.) Higher Cash Flow
Like having good tenants, having positive cash flow is essential for any successful real estate investment. And by investing in SFRs, investors receive high cash flow. The returns received by investing in single family rentals tend to be higher than other rental types, including apartments and multifamily homes. One of the reasons why SFRs have higher cash flows is that tenants tend to pay for utility bills. Under almost all other rental properties, the landlord takes care of these bills. These bills add into your returns, especially if you provide different amenities. Even in big cities with hot markets, investing in single family homes is a great and reliable way for high returns.
5.) Simpler Management
Management is another fundamental of any successful rental property. Management encompasses everything from maintenance, expenses, tenant screening, and so much more. Typically, for larger investment properties, investors hire property managers to help take care of their property. That is not necessary when you’re investing in single family homes. Simply because a SFR is small, its management duties tend to not be so tiresome. Its maintenance costs are also relatively low as well. And as previously mentioned, tenants are very unlikely to damage or ruin SFRs in any way, leaving you with even less management concerns. Management could be a one-man show and everything will still run smoothly. Still, if you plan on investing in multiple single family homes, you then might want to consider hiring property management. Or not. The call is yours.
6.) Value, Liquidity, Buyers
Even if you plan on not renting long-term and want to sell your property, investing in single family homes is a great choice. For instance, SFRs have great liquidity; they can sell relatively quickly, even in a slow market. As a result, more prospective buyers will be in the market, wanting to purchase the property. Single family residences also have high value. They appreciate faster than other types of properties. Whether you’re counting on rent or appreciation from your investment, single family homes can do it all.
To wrap it up,
Investing in single family homes is one of the best ways out there to earn high rental income. Its low prices, high value (for renting and selling), great cash flow, and superb tenants make it a must for investors, beginning and experienced, to invest in. Don’t wait too long, the time is perfect for single family homes!
To find single family homes and all other kinds of properties around the country, start your property search on Mashvisor.