It’s important to recognize a few things before investing in real estate, just as you would when you invest in any other type of investment. By purchasing a single-family rental property, you can generate additional income from renting it out while building equity over time, which is one of many ways to build wealth from your rental property.
As a matter of fact, single-family residences make up about half of all rental properties all across the United States. As a result, single-family residences are a great place to start for new investors looking to get their feet wet within the residential real estate market.
In addition, there is a rising demand for properties not only in the domestic market but also internationally, which means now is the right time to invest as interest rates won’t remain low for much longer, so now is the ideal time to do so.
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Single-Family vs. Multi-Family: What’s The Difference?
Single-family rental homes or multi-family rental homes are good investments. They both have a positive cash flow, but there are some differences between them, so be prepared to take a closer look at them both.
Renting a single-family home is much more affordable, and there is a greater chance that it will appreciate in value. With the purchase of a single-family rental property, you will be able to find suitable tenants as well as maximize your exit strategies.
It is, however, true that multifamily properties offer you higher rents and a higher rate of vacancies, and, as the rent is influenced by the landlord and not by economic factors, it is primarily dependent on the landlord.
Additionally, multi-family properties usually do not have as good a return on investment as single-family homes, particularly now and in the past several years. A multi-family home typically has a lower unit cost than a single-family home due to reduced capitalization rates.
Why Choose Single-Family Rentals?
The perfect place for new investors to start is with SFR investing; they’re a good rental investment. Before you jump into these properties head first, make sure you know what you’re getting into before investing. These properties offer immediate returns and the potential for long-term appreciation.
It is possible to generate a steady, reliable income by renting out the apartment or house you own to a trustworthy, reliable tenant who loves living there.
Investing in rental homes can be stressful, so real estate investors often hire property managers to handle repairs, rent collection, and communication with tenants. The maintenance, cleaning, and upkeep of a single-family rental home are obvious, but there is also the requirement that the renters mow the lawn and otherwise properly maintain the home.
It is much more affordable to purchase a single-family home. In addition, it is easier to get financing for properties like this in terms of attracting tenants, and you can also be pickier when it comes to choosing the renters. Here are a few of the advantages:
1. Cheaper and Easier to Access
The pool of buyers for single-family homes is larger than that for multi-family homes. Since there is a much larger selection to choose from, you will be able to find an appropriate one much easier.
As a result, you don’t need a lot of capital to start investing in this type of property because of the lower price. Since the housing crisis of 2007, single-family rentals have been increasing at a faster rate than single-family home sales.
2. Access to Loans is Easier
Down payments for residential real estate loans usually require no less than 20%. Approximately $20,000 per SFR costs around $100,000. An apartment building or even a few units can easily reach $1 million in value.
You might not think that maybe 5 to 10% figures are important, but keep in mind that a modest multifamily building can cost 1 million dollars, so our down capital investment would be $250,000.
3. Good Resell Value
When you consider the lower price, it’s pretty obvious that SFRs are easier to sell. There is also the issue of demand and buyer pool that must be considered along with the price. Home buyers needing a place for their families are attracted to single-family homes, not only real estate investors.
Rent for single-family homes has outpaced even the sale of single-family homes, especially multifamily housing, which has shown an increase in rent.
In fact, it is growing at an incredible rate. There has been an increase of 31% in the number of single rental properties in the United States in the decade since the real estate crisis in 2007, according to a recent report from Pew Research.
Start Investing in SFRs
A real trend is emerging where people are buying and doing their own renovations to SFR properties. Approximately 70% of rental properties were owned by investors who were located within one hour of driving distance of the property.
Investing in local properties can be a good way for owners to self-manage their rentals, along with the opportunity to get better deals on fixer-uppers and avoid paying expensive management fees on those properties.
Investing in real estate on your own has become easier than ever before, thanks to the rise of third-party property management tools, which make it easier for people seeking to invest in their first home or to buy the house of their dreams.
The real estate market has been a popular asset class among investors for decades – now, you can make money from it. Saint Investment provides an institutional-quality portfolio of real estate assets that are diversified and consistent. Take advantage of our free resources today!
Frequently Asked Questions:
The costs involved in investing in single family homes can include purchase and closing costs, property renovations and repairs, insurance, property taxes, and ongoing maintenance and management expenses. Additionally, there may be costs associated with financing the investment, such as mortgage interest and fees, as well as any property management fees for hired property management services.
To find and evaluate potential single family home investment properties, one can research real estate market trends and conduct property searches through online real estate listings, local multiple listing services (MLS), or working with a real estate agent. It is also important to thoroughly assess the property, including evaluating its location, condition, rent potential, and future resale value. Additionally, conducting a thorough market analysis to understand the local rental market and competition can also help in the evaluation process.
Investing in single family homes carries a number of risks, including fluctuations in the real estate market, fluctuations in rental income, and potential vacancies. Additionally, the cost of property ownership, such as property taxes, insurance, and maintenance expenses, can also impact profitability. Other potential risks include natural disasters, changes in local zoning laws, and the costs and difficulties associated with evicting a tenant.
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.