Almost two-thirds of the housing stock in the United States are single-family real estate (SFRs), most of which are located in the suburbs. These ways of living have long been deeply ingrained in the American consciousness.
Among the terms used to describe rental properties, the term "Single-Family Residence" is a common one, as it refers to standalone family homes.
Besides being called single-family rentals, the residential type of real estate, SFRs are also known as one-family houses with a wide range of renters, estimated at one person in five.
As a share of the housing market, single-family rentals had experienced a steady increase since 2008, when the housing bubble burst, and many people were displaced.
With the pandemic pushing people to seek out more space in suburban homes, SFR rentals are now the fastest-growing segment of the housing market. A growing number of institutional investors have shifted their assets to the housing market in recent years, which is now forced to compete with families looking to purchase a home in certain markets.
A single-family rental property is generally more likely to generate investment returns for real estate investors if it generates rental income. Historically, high rents have been commanded for SFRs, and for a good reason. Cash flow is king when it comes to SFRs.
As a matter of fact, most people are willing to pay over the odds for their own homes, including garages, yards, and back yards, so by charging higher rents, you can generate more income, which translates into a higher cash flow for the landlord.
A further point to consider is that year after year, the rent for single-family homes has consistently increased. SFR properties make for appealing investments for the following reasons.
One of the most appealing aspects of single-family rental properties is that they are affordable and have a high return on investment. There are many advantages to purchasing single-family homes when compared to other types of investments, like commercial or multifamily buildings, which are often much more challenging to purchase.
There is a major difference between SFR properties and other real estate types because they are smaller and designed for only one family. They are also less expensive than larger properties.
Aside from their affordability, single-family residences are also known for their profitability.
As soon as these properties are rented out, investors can earn an income stream from an array of rental payments that are made monthly.
However, if you run a successful business in a popular market area, you will rarely experience vacancy problems with these properties.
Investors of all skill levels and backgrounds can both take advantage of the opportunities available when investing in single-family homes real estate. There are two ways that SFR properties generate returns for their investors: monthly cash flow and long-term appreciation of their value.
There is often a need to utilize the property's cash flow to cover any expenses related to the property, including mortgage payments, loan repayments, and general upkeep. In other words, the value of your home is going to rise the longer you own it due to property appreciation.
You know when the right time comes that you will be able to sell, you will find that you will be rewarded with those returns. It is, therefore, no surprise that SFR properties can be a great investment for almost any investor for this very reason.
In general, single-family houses are relatively easy to finance because of the many different ways in which they can be financed. This type of property does not require large amounts of capital upfront; rather, it can be financed over time by investors.
Investing takes time, but once an investor begins to secure a loan and research the market, in most cases, the commitment level is very manageable, and they only need to focus on securing a loan.
To be close to their market if needed, many real estate investors buy properties nearby their market. When you choose an area of real estate that is familiar to you, you will be able to make more accurate predictions about how your area's market will perform.
In addition to traditional mortgages, private money lenders and even existing equity may be used for the purchase of SFR properties. The fact that these properties are relatively easy to manage will be of great interest to many investors. A property manager can be hired as a contractor to handle the responsibility for you, or you can handle it independently.
A single-family home is no exception because real estate has numerous tax benefits. Since they are tangible assets, SFR properties have inherent tax benefits. Real estate offers protection from the same types of volatility as stocks and other forms of investment, even though stocks and other forms of investing may suffer immediate gains and losses.
When stocks are down, the principal is dramatically reduced, while SFR investments tend to perform well despite market volatility and are tangible assets. In 2008-09, there was an exception, but its underlying causes were gone: subprime loans were traded, and lending standards were weaker.
Investing in single-family homes is worthwhile, but there are a few things to consider. To begin, identify possible property buying strategies. In addition to your bottom line, the choice of financing can influence the speed at which you can obtain another SFR.
An SFR property can be a great investment compared to other strategies. Multifamily investing provides more protection. Single-family homes lose their cash flow 100% if they are vacant. The loss of rental income that comes from vacancies can be mitigated by multiple units. The loss from SFRs cannot be offset with other units.
In the past, real estate has been a popular asset class among investors. Now, you can invest in it too! With Saint Investment, you can invest in a consistent, diversified portfolio of institutional-quality real estate assets. We look forward to hearing from you!
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.