If you’re looking to invest in real estate, you need to narrow your search before you browse homes online. Knowing what property type you’re after will save you a lot of time and resources.
This article will highlight why you should invest in single-family rental homes.
One of the most substantial reasons to consider investing in single-family rentals is they have a higher ROI than their residential counterparts. This significantly higher interest is partly due to the high demand, and according to economics, that pushes up the rent a landlord can charge. In addition, greater cap rates in the market mean investors stand to earn more in terms of risk and reward.
Another thing to consider is that unlike MFUs with shared spaces like common rooms and stairwells, SFUs have a slower degradation rate. As a result, you can spend less on the maintenance and upkeep of the building annually.
As previously highlighted, landlords stand to earn more from SFUs due to their high demand. A family of four has more space per square inch of the property in a single-family unit, which is a huge priority for some people. Tenants that are big on hosting several guests would rather live where they’re less likely to be a neighborhood nuisance. That way, they can host their family barbeques or parties without fear of disturbance. Also, the extra space often translates to more privacy.
So due to the high demand for SFUs, landlords are less likely to experience long periods of vacancies. It also influences how much rent you can charge since so many people are willing to pay for prime real estate.
Less tenant turnover
One of the run-offs of the high demand of SFUs is you have less tenant turnover. Tenant-stickiness is a term people in real estate circles use to refer to the likelihood of a tenant to renew their lease and remain in their apartment. On average, it is higher in single-family units than other residential properties. Why? You might ask. Well, SFUs are often more conducive for the families that live there because they have more privacy and freedom to make the space their own.
Such tenants are more likely to stay with an average 3-year tenancy. On the other hand, their counterparts in multiple-family units usually stick around about 2.5 years. That’s six whole months of steady income and savings on vacancy ads.
High Tendency to Appreciate
Real estate is a popular investment choice because it tends to grow and hedge the effects of inflation, and single-family units have a higher tendency to do so. That’s why in another real estate strategy called buy and hold, investors tend to focus on us. They’re relatively easy to acquire, and the demand for them continues to rise, so earning your money back plus interest is almost a guarantee.
Consequently, SFUs are a good investment for new investors. If you find that real estate isn’t your game, at least you don’t have to sell at a loss.
One of the benefits stock has over real estate is its high liquidity. In other words, you can sell it faster and earn your money’s worth. That said, the level of liquidity when it comes to realty differs from one location to another and one property to the next. Because SFUs have a greater demand and ROI, they are one of the most liquid investments in your real estate portfolio.
It’s one of the reasons flipping houses is a generally successful rental strategy. Most people that embark on this journey do it with us. In a matter of weeks, you could purchase one, make cosmetic changes, and sell it for a decent return.
Single-family units tend to cost less than other residential properties like MFUs and apartment complexes, making them easier to finance. It’s easier to raise $60,000 to secure an SFU worth $300,000. But gathering $600,000 to meet up with the 20% downpayment for a multiple-family unit would be significantly harder.
Other than securing the initial capital, many more options are open to investors in SFUs. It would be easier to negotiate terms for seller financing because the owner bears less risk. Similarly, you could also use your primary residence as collateral through a home equity loan or home equity line of credit (HELOC).
While there are many viable paths to earn money through real estate, investing in SFUs is uniquely profitable. Its higher demand often translates to more interest, less tenant turnover, and higher liquidity for the owner.
Although it certainly has its drawbacks, there’s no denying it is a tangible investment. However, suppose you want to maximize your profits. In that case, you have to call in the experts which you can do by clicking here, who can help you lease your property, decrease your expenses, and keep your tenants happy.