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Single-family homes are popular in the rental property market which makes them an appealing choice to new investors who want to build their real estate portfolio.
If you’re a new investor and want to know if investing in a single-family home is a good idea, the short answer is yes. Single-family homes are a promising rental property business because of their affordability and availability. You’ll be likely to make a solid return on your investment, so single-family homes are a smart choice when you’re starting your rental property business.
Keep reading to learn more about why you should consider buying single-family homes as a first step toward investing in your rental property business.
What Is A Single-Family Home?
Single-family homes are types of rental properties that only have one unit. They’re not often found in the center of cities but often have front or back yards. You can find many different styles and sizes of single-family homes in most places, so they’re usually appealing to many different kinds of tenants.
6 Reasons to Invest in Single-Family Homes
Now that we have established what a single-family home is, let’s dive into the reasons why these homes make great investment properties.
1. Single-Family Homes Are In-Demand
Before deciding what type of rental property to purchase, think about the types of properties that are most in demand for renters. Single-family homes are usually at the top of the list which means you can increase your rental income.
According to Statista, over 40 million residents rented single-family homes in 2020. This is more than any other type of property. A wide variety of renters seek out single-family homes because they usually offer more space and tend to be located in quiet neighborhoods or suburbs.
Vacancy rates have significantly dropped in the past few years making it a little challenging for prospective tenants to find an ideal home. By investing in single-family home rental property, you are providing supply to the rental property market and are likely to attract high-quality tenants that can help protect your investment.
2. Single-Family Homes Are Profitable Investments
The demand for single-family homes in the rental market means you could be part of a thriving business. The average rental rate for this type of rental property business increases by 3% annually.
Multi-family homes such as apartment complexes are considered a different rental property type and therefore have different rental rates. Since there are multiple units, you can get multiple rent checks each month, but larger properties mean additional fees, responsibilities, and regulations.
Another financial advantage of owning a single-family home is the ability to claim tax deduction benefits.
3. Single-Family Homes Are Affordable and Appreciate Faster
In general, financing a rental property that's a single-family home is more affordable than investing in a duplex or apartment complex, especially if you’re new to investing.
Although the average market price for single-family homes has increased in the last few years, the smaller square footage and lower number of units still make them more affordable than a multi-unit building. Since there is less money involved upfront when acquiring a single-family home, this also means less risk with your investment.
And even if there is a lower initial investment cost, single-family houses appreciate in value faster than multi-family properties. You can rent out a single-family home while its value continues to appreciate over time and choose to sell at a later point.
Because it is affordable, offers a lower risk factor, and has more potential for appreciation, you can never go wrong with investing in a single-family home as a new investor.
4. Single-Family Homes Are Compatible with Many Rental Strategies
If you are looking into diversifying your investments or looking into a variety of rental strategies, owning a single-family home can offer you flexibility in the future.
Even if it is a single-family home, technology and the changing times have made it possible to rent the house short-term rather than going with the traditional long-term lease. You can choose a variety of rental marketing platforms to attract short-term renters who need a space for a few weeks or a few months.
5. Single-Family Homes Are Easier to Finance
If you are a new investor, buying a single-family home may be easier in terms of getting a loan to finance the purchase. Also, down payments are usually relatively low compared to multi-family houses or apartment complexes.
6. Single-Family Homes Attract Higher-Quality Tenants
Those who are looking to rent single-family houses tend to stay long-term and tend to be reliable tenants. Since renting and furnishing a larger space is usually more expensive for renters, they are likely to be more responsible and are probably looking to make your rental into their home.
As long as you are a reliable landlord who responds to maintenance requests and tenant concerns quickly, you can keep your property in tip-top shape and retain tenants for longer. Having long-term renters also helps you save money on property marketing and tenant screening.
Bottom Line
Investing in a single-family home can help you reach your financial goals because the demand is high and its value appreciates quickly compared to other types of rentals. If you are a new investor, the factors mentioned above are important to take into consideration before you select your property.
If you are new to owning rental properties and want help navigating the rental property business, get in touch with the team at Pinnacle Property Management. We handle all aspects of rental property management so that you will have enough free time to do other things that you love. Contact us today!
