Established real estate investors often work within a certain niche. If you’ve had success with multi-family units, for example, then you might have little reason to consider other options. Maybe you’re convinced that urban markets can give you the best return on investment, and would never think to look to smaller areas.
In reality, the suburbs provide an excellent investment opportunity that real estate investors shouldn’t dismiss out of hand. Single-family properties in growing communities offer great benefits, given their ideal location, ability to attract great tenants, and the stability of their earning potential.
We’ll examine that potential in greater detail, touching on different areas of suburban investments to provide a comprehensive picture. There’s no one way to invest in real estate, and you might find that suburban properties are the perfect solution for you.
Locational Benefits of Suburban Rentals
City living has a special allure, with the hustle and bustle, energy and flow, but those who invest in urban areas have to work within certain restrictions. One of the primary restrictions is the limited availability of space, detrimental to tenants, and, by extension, to landlords. Suburban areas allow for greater freedom.
Within a multi-family property like an apartment complex, the most outdoor space a tenant will have to themselves consists of their balcony. A unique selling point of suburban living is the yards these tenants might enjoy, and yard space isn’t the only advantage of this type of location. The suburbs are often calm and quiet.
When weighing the pros and cons of suburban investments, the crime rate should also factor into an investor’s decision to purchase. Suburbs typically have a lower crime rate than urban areas, which is attractive to both tenants and landlords. Stolen or damaged property is far less of a concern where crime is uncommon.
Demographics for Suburban Rentals
A landlord may have little difficulty leasing the units in their multi-family building, but the quality of the tenants has an enormous impact on profitability. If their average tenant is irresponsible, disrespectful, and negligent of the terms of their contract, they often cause more trouble than their monthly rent is worth.
Many tenants who choose to rent in the city are single individuals without a spouse or children, dividing housing expenses among roommates. This isn’t in itself a problem, but their lifestyle doesn’t reflect the same stability of those who rent single-family properties, both in terms of income and planning.
Tenants who rent single-family properties often do so for the reasons detailed in the previous section — for space, peace and quiet, and low crime rates. These features appeal to them because many have a family — or a baby on the way — and they need a suburban rental that will accommodate their needs.
This growing family demographic is especially drawn to the walkability of the area and proximity to schools and public parks. Since low- and medium-density cities provide 10 to 40 times the amount of park acreage that urban areas typically offer, city rentals just can’t compete in providing a great value for young families.
These families tend to have a higher combined income than tenants living in multi-family properties and can afford pricier monthly rates. Additionally, those who live in the suburbs tend to stay there for an extended period, which means landlords can expect lower vacancy rates.
Earning Potential of Suburban Rentals
Concerning rental income, purchasing an investment property in a suburban housing market will prove profitable in 2019. Real estate investors can raise the rate they charge for rent based on factors like high occupancy rates, economic growth, and overall demand, which promise to yield significant returns moving into the year.
To provide an example, the price per square foot is generally lower within suburbs than it is in the city. This enables real estate investors to purchase a larger property in a suburban area for the same price of a property in an urban area, which allows them to spend their money more efficiently, especially if they’re financially limited.
As for maintenance expenses, investors in single-family properties have to spend far less on wear and tear than those who manage multi-family properties. The scale of single-family properties, as well as long-term tenant attachment, both result in fewer incidents of damage. Repair work for an apartment complex can be costly.
Suburban Real Estate Investments
Considering the locational benefits, associated demographics, and earning potential of suburban real estate, their investment potential is clear. Real estate investors should give due consideration to single-family properties in the suburbs, whether they’re new to purchasing properties or want to diversify their real estate investment property portfolio.
Either way, the value of suburban real estate is hard to deny.
To start searching for money-making long-term rental properties in the suburbs, sign for for Mashvisor now.
This article has been contributed by Holly Welles from The Estate Update.