Single family homes differ from other real estate properties in that they are separate, stand alone structures, usually found in suburban areas, and often include a private yard. When compared with multi family homes, apartment complexes, and commercial properties single family rentals hold significant advantages.
Single Family Rentals (SFRs) usually draw in single families, potentially young couples with few children, or sometimes single tenants, who aren’t necessarily ready or able to purchase a home, but want to rent with the intention of staying and treating the home as if it is their own. This encourages tenants to take better care of your rental property, causing you less headaches.
A population worth mentioning are “renters by choice”, which includes gen-Z and millennials, who have proven to be more likely to rent than previous generations. However, we can now also include baby boomers into the renters by choice category as many are choosing to sell their homes, downsize and rent instead. Whether this is due to rising home prices or simply a preference to flexibility, this population of renters creates a substantial need for rental properties.
Generally, SFR’s are easier to purchase than alternative real estate investment properties and can provide better returns. In fact, buying an SFR can allow you to invest in more capital than you might actually have. If you have enough money for a down payment of 25%, you can use leveraging to purchase a home. Leveraging is when the investor borrows money in order to grow their returns. Once you’ve purchased the home, you’ll be able to occupy it with tenants and collect rent as the property appreciates. Using leverage to buy SFR’s can also allow you the funds and flexibility to buy more SFR’s and boost your investment portfolio.
Speaking of buying more SFR’s, there tends to be a larger inventory of SFR’s when compared to other types of real estate investment properties, making them an easily accessible investment option. With such a large inventory of single family homes around the United States, they usually come with a cheaper price tag than other types of property. Therefore, having an investment option with accessibility and affordability allows you to purchase more of them, ultimately creating more cash flow.
Another advantage to investing in single family rentals is that there are a variety of different loan options when compared with apartment complexes and commercial buildings. You have a number of traditional loan options as well as alternative lending options. Alternative lenders, or private lenders, tend to be a quality source for borrowers investing in SFR’s because they are able to be flexible and create a loan with specific terms that meet the needs of all parties involved.
It is especially important to work with a seasoned lender that understands single family rental loans whether you’re embarking on your first investment or have a vast portfolio. If you’re looking for an investment property that could provide immediate returns and a high probability for long-term appreciation, SFR’s might be the investment for you!