In the real estate investing market, more than half of the investment properties are single-family homes. Many real estate investors choose them over other types of real estate investment properties due to their lower purchase price, lower property taxes, lower maintenance costs, higher profitability, higher appreciation, and many more benefits.
However, just because single-family homes generally have more benefits, it doesn’t necessarily mean that any single-family home will be a successful real estate investment. Let’s take a look at the main 7 factors that real estate investors need to look for to find the best single-family homes.
Single-Family Homes: Location
Many successful real estate investors would tell you that the three most important factors for a successful career in real estate investing are: location, location, location. In real estate investing, the best investment properties are placed in excellent locations. So, naturally, when investing in single-family homes, real estate investors should look for a killer location.
As you can obviously tell, the most common tenants of single-family homes are families. Therefore, real estate investors have to look for locations that attract these target tenants. Families prefer renting in a safe, child-friendly environment, with good schools, easy access to jobs, and health facilities, as well as shopping areas.
Moreover, the best single-family homes for rent are in an area with a good standard of living, such as locations where real estate investment property taxes are not excessively high, the investment property insurance is good, and legislation is advantageous for real estate investors and landlords. In addition, if you’re considering renting your real estate investment property through Airbnb, choose locations that allow Airbnb rentals and don’t require too many fees.
Single-Family Homes: Investment Strategy
Assuming you’ve found the best location for your real estate investment property, the next thing to consider is what you are planning to do with it. Should you fix-and-flip the investment property or go for the buy-and-hold strategy? If you’re considering renting out the investment property, how should you go about doing that? Should it be on a long-term basis (traditional rentals) or short-term basis (Airbnb rentals)? Maybe you want to rent out only part of the property and live in the other part. Or maybe you don’t want to rent it at all! These are all strategies and possibilities that real estate investors should carefully think about before investing in single-family homes.
The best thing about single-family homes is their flexibility. Therefore, the best single-family homes are those that work as both traditional and Airbnb investment properties. This means that real estate investors should choose a rental property in which families will be happy to live and travelers would be willing to stay.
Single-Family Homes: Positive Cash Flow
The main goal of every real estate investor is to generate positive cash flow and make money from real estate investing. Positive cash flow is when the incoming cash flow is more than the outgoing cash flow during a specific time period. Real estate investors are stuck with a negative cash flow when they’re not gaining a profit from the investment, which is something no real estate investor desires.
Single-family homes already tend to have higher positive cash flow than other types of real estate properties. This is mainly because tenants pay their utility bills – which in other types of real estate investment properties landlords have to pay.
Nevertheless, before investing in single-family homes, a real estate investor has to conduct real estate market analysis, calculate all possible expenses, set up the correct rent charge, plan accurately, and spend wisely in order to ensure that the rental property will generate and maintain positive cash flow. This can be simply made using Mashvisor’s Rental Property Calculator. This real estate investing tool will project returns that are automatically calculated using different metrics depending on certain data that the real estate investor enters.
Single-Family Homes: Physical Features
In real estate investing, most single-family homes are rented out on long-term basis. Therefore, tenants of these investment properties look at them as their own homes, and they are interested in the characteristics and physical features that the investment property offers. Single-family homes’ tenants are looking for the freedom, privacy, and space that condos or multi-family homes don’t offer.
Real estate investors have to look for the number of bedrooms, bathrooms, and living areas in the rental property. Also, what are the benefits that your investment property offers to tenants which others don’t: a bigger yard, a garage, a fire place, etc.? This is an important factor to consider not only because tenants are more interested in single-family homes which offer these features, but also because the more characteristics and pluses your rental property has, the higher rent you can charge.
Single-Family Homes: Financing
In general, single-family homes are less expensive than other types of real estate properties out there. Their lower prices make them easier to purchase. There are many ways for a real estate investor to finance an investment property. Of course, some ways are riskier and harder than others.
Whatever method of financing you opt for, it is recommended to have a good credit score and cash reserves. Thus, real estate investors should work on building these two facets of financing before investing in single-family homes, especially when applying for a mortgage.
Single-Family Homes: Cheap Maintenance
While luxury rentals can generate positive cash flow, they are very expensive to own and maintain. Instead, the best single-family homes are rather simple. Having a swimming pool might be attractive to some tenants, but imagine how much time and money the real estate investor will need to spend on fixing it if it got damaged.
Thus, the best single-family homes are those that look nice and welcoming, and at the same time are easy to maintain. Mashvisor’s Property Finder is the best tool out there that allows actual and future real estate investors search for any type of rental property throughout the US housing market, including single-family properties, multi-family properties, traditional rentals, and Airbnb rentals.
Single-Family Homes: High Real Estate Appreciation
Having a high real estate appreciation allows real estate investors to make a profit in the long term once they decide to sell the investment property. Single-family homes are already a better option in this regard as their value appreciates more than other types of real estate properties.
As a result, the best single-family homes are located in areas expecting major economic growth, where land is becoming limited, and which are likely to be turning into major business hubs and tourist attractions in the coming years – these factors ensure high real estate appreciation.
Single-family homes are generally better investments than other types of real estate properties. In spite of this, real estate investors still need to look for the previously mentioned factors in a single-family home to guarantee a successful real estate investing career.
Don’t forget to sign up for Mashvisor to use Mashvisor’s Property Finder to search for and find the best real estate properties throughout the US housing market, and Mashvisor’s Rental Property Calculator to further analyze and compare different real estate properties.