Investing in single family homes is arguably the best option for a beginner residential real estate investor. So if you’re looking to get started with this property type, here’s your guide to the single family rental market 2020.
An Overview of the US Single Family Rental Market
Overall, single family properties account for roughly 35% of the US housing market inventory. And there are more than 12 million single family homes that are being rented out in the US. So it’s clear that rental demand for single family homes is quite high. Dropping vacancy rates for single family rentals (SFRs) is another a clear indication of this high demand. In the third quarter of 2019, for example, single family vacancy rates were at 6.8%, which was a 0.3% decrease from the year prior. With low vacancy rates, single family rentals are able to produce stable cash flow. This is just one of the many reasons why beginner real estate investors are encouraged to enter the single family rental market.
Single Family Rental Market Trends for 2020
There are 3 key trends to know before entering the single family real estate market in 2020:
Millennials Continue to Move to the Suburbs
Millennials are the core group that is driving demand for single family homes. The US Census Bureau continues to report that millennials are abandoning big cities, such as New York, San Francisco, Houston, Chicago, and Washington, D.C., in favor of the suburbs. And this migration is not occurring in small tides. According to the PwC’s Emerging Trends in Real Estate report, over 80 million millennials are setting their eyes on the suburbs. Millennials are moving to various 18-hour cities, heavily contributing to the economic success of such areas. As a result, millennials are now a part of the pool interested in buying a single family home.
Why are millennials just now looking into the single family real estate market? According to the PwC report, it seems that millennials are finally catching up to their projected financial pace, after lagging behind due to the Great Recession and its aftermath. Current events in 2020 are also driving millennial migration. According to Realtor.com, many Americans are showing a more profound interest in single family rural homes and the suburban real estate market due to the coronavirus pandemic.
Although many millennials are looking to buy single family homes, many others are looking to get the “American Dream without a mortgage.” Even those who cannot afford to buy a home now are looking to rent out single family homes with more space in the suburbs, driving demand in these single family rental markets.
Single Family Supply Is on the Decline
The supply of single family homes is decreasing, which in turn, is leading to increasing property prices. According to the Department of Housing and Urban Development, 2019 was the first time in 7 years that the number of single family homes for sale had decreased from the previous year. Also, the supply increase from the foreclosure crisis has begun to shrink. As a result, property prices have increased and rental rates have also become more expensive. In September 2019, for example, it was reported that rent in the single family rental market had increased by 3% from the year prior.
Technology Plays a Big Role
Year after year, technology continues to change business and society as a whole. As you’d expect, this is also true for the single family rental market 2020. While technology provides easier avenues to finding cash flow single family rental properties, it also generates more competition for real estate investors. Nonetheless, real estate investors need to rely on big data algorithms and the like in 2020. Luckily for you, dear reader, your search for the best real estate technology ends here. With Mashvisor’s real estate investment software, you can analyze any single family rental market and property in the US.
How to Get Started in the Single Family Rental Market 2020
So, you now have a clear picture of the single family rental market 2020. With that covered, here’s how to start investing in single family homes this year:
Find the Best Investment Property
Real estate investing isn’t limited to your local housing market. If your current locale is not too hot for investing right now, consider looking for other areas. With Mashvisor’s real estate heatmap, you can easily find the best neighborhoods for single family homes. The heatmap allows investors to find neighborhoods based on specific filters. Examples include listing price, rental income, and return on investment (cash on cash return). After selecting a filter, the heatmap will present the areas that best match your inputs. For example, if you’re looking for an area with affordable single family homes for sale, check neighborhoods that turn red after you set the listing price filter.
Once you select a neighborhood, you’ll see all the investment properties for sale in that location. Each one can be analyzed in minutes using Mashvisor’s rental property calculator. This tool will help you find the rental property with the best returns as it offers data like cap rates for single family home and will help you decide on the optimal rental strategy.
Finance the Investment Property
You’ll need to be sure you have a foolproof financial plan before officially entering the single family rental market. Shop around with different loan lenders and consider working with a broker to find the best mortgage for your investment.
Manage the Single Family Rental Property
Successful property management can either make or break your SFR. If you are planning on being the landlord for the property, you will need to manage the property and its tenants. While the decision depends on multiple factors, many investors opt to self-manage their single family rental property. However, if you plan to expand your portfolio to include multiple rental properties, professional management might be the wiser choice.
Get Ahead of the Competition with Mashvisor’s Tools
In order to become the best single family investor you can possibly be, you need to use Mashvisor. Mashvisor’s real estate investment software provides a variety of investment tools that will help you achieve a high ROI with real estate investing.
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