A single family rental home is a standalone property on its own lot. Investing in a single family rental home is basically investing in a house or a condo with an intention of renting it to a single tenant. It has few pros and cons attached to it but it depends on your expectations from the property. Usually people tend to buy a property in a low budget or affordable locality and revamp it to attract new tenants. A single family home is a residential home. As a real estate investor if you’re looking to increase the number of rental properties you currently own with bigger returns, you should consider investing in single family rental homes.
Following the housing market decline in 2007, single family rental homes became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. These rentals outpace both single-family home purchases and multi-family apartments in the US. Almost all the housing demand in the US in recent years has been filled by single family rental units. Millennials are leading the way to single-family rentals. In general Americans are more interested in renting than owning. Big REITs are buying cheap homes and turning them into cash-generating rentals. People who can no longer qualify for mortgages can easily live in these single family rental units. They don’t need a large down payment to move in.
What is rental property investing and what is the top most advantage of buying it?
One of the simplest definitions of rental property investing is getting paid for what you own, rather than just paying to own it. The top advantage of investing in a rental property is that it gives the investor the liberty to determine their profits in many ways. Buying a home might not give you the desired ROI, but it will still give you expected bang for your buck, if you invest in a rental property.
Single Family vs. Multi-Family Homes
Single family homes and multi-family rental homes are good investments with more than 1% return-on-investment. They definitely lead to a positive cash flow, but there are differences between both the investments.
Single Family Rental Homes
Affordable, higher appreciation, suitable tenants and maximum exit strategies.
Multi-Family Rental Homes
High rent, maximum vacancies, and rent depends on the landlord as it is not subject to economic factors.
Should You Invest In Single Family Rental Homes
There are innumerable reasons to invest in single family rental homes, but this step should be taken only when it’s an ideal time to invest.
Consistent Cash Flow
If you focus on the positives, it helps in consistent cash flow through regular income and you can use it for other businesses or investments.
It also gives different tax benefits to landlords because it is an investment property.
Exit and Sell
A single family rental home is the most desirable investment as you have the ease to exit and sell without much thinking. Investing in a single family rental home rather than multi-family rentals is the easier option of re-selling, should the owner wish.
Higher Cash Flow
Investing in a single family rental home increases your cash flow due to higher rents charged for detached housing. Furthermore, one is less likely to have a regular lease-in and lease-out of tenants, and long-term leases mean less unnecessary operational expenses.
Flexibility with growth is also more manageable for the investor or property owner when dealing with single family rental homes. Where multi-family homes demand up-front costs and commitment, investors can choose how many single family rental homes to add to their portfolio, adjusting their investment as they wish.
This coupled with the other listed advantages of a single family rental home make it the obvious choice over investing in a more expensive multi-family complex.
To know more, read this blog post about advantages of Buying Single Family Rental Properties.
Single Family Rental Homes
As you already know that a single family rental home a standalone property on its own lot. Single family rental market usually runs due to few common reasons like affordability and a stable income in return. In the US, most of the real estate investors are looking for markets with single family homes which can be converted into rentals. In the US, prime Manhattan or downtown San Francisco are not the hub for investing in single family rental homes, as a matter of fact, it is usually the outside localities away from city centers.
Below are some of the tips for investing In single family rental homes.
Make sure you choose the right property
Ensuring that you have a steady rental income stream is the key to making the right choice. Investing in real estate is all about capital growth, so choose a property that is right for you and your income requirements.
Make sure the math adds up
Investing in single family rental homes is a great way to see long-term financial growth, however you need to be able to hold onto the property for the long-term to see your investment reach such dividends. Do the maths and make sure you have enough patience for the long game.
Make sure you find a professional property management company
Once you find the right property management company, they will do their job allowing you to sit back and enjoy the rental income. When selecting your property manager look for a company which is reputable and approachable and ask them questions. Reach out to their existing or previous clients and get the first hand feedback of their services.
Buy a property in an area that will guarantee renters
This is crucial to earning a good return on your investment. If you buy in an area where the demand is low, your property may remain uninhabited for weeks and months on end. Make sure you buy in an area that is experiencing some growth and hire a reputable turnkey provider for it.
Hire Turnkey Rental Property Providers
A true turnkey rental property is an amalgamation of a well determined process with the asset. A turnkey property is a property which is immediately available to rent out, often a refurbished home sold by providers. Turnkey properties are good options for single family rental homes and are most suited to investors who are not looking for the deep introduction into real estate but would rather like to reap its rewards quickly. A renovated property with a sorted tenant, property management and maintenance makes an ideal turnkey investing system.
It is advisable to take a conscious decision before getting into this, as not every turnkey property qualifies this criteria. You can easily get this kind of rental ready property through a reputable turnkey rental property provider. To begin with, it is mandatory to research thoroughly to identify the right deal, so an investor should consider places beyond their local area. Learn new markets rather than just playing it safe, as this will open doors for new opportunities. Successful property management can play a major role in the long-run, and finally understand the importance of leverage and find a nice financial partner.
Turnkey dealing may sometimes turn a bit ugly if you go for a distressed property such as a REO and then do the renovation on your own. Hence, consulting a good turnkey provider will help you in acquiring a renovated property with a qualified tenant and they will even manage the property. To know more about how to finance turnkey rental properties, click on the link.
Norada Real Estate Investments is once such company which is a true turnkey property provider. It helps take the guesswork out of real estate investing. By researching top real estate growth markets and structuring complete turnkey real estate investments, they help you succeed by minimizing risk and maximizing profitability.
To know more about how to buy turnkey rental properties, click on the link.
Best Single Family Rental Markets For 2018
Below listed are few insights on Single family rental (SFR) markets in the US, which are best for investments in 2018.
There is no second opinion on Chicago being one of the most targeted and attractive markets in US for investing in single family rental homes. There are many fully renovated rental properties in Chicago which you can buy for a rental income. The ROI of 5.2% offers an opportunity for profit, and the median rent of $1,798 is fairly standard for US cities.
- Average Rent Per month: $1,650
- Average Household Income: $63,000
- Population: 2.705M (2016)
Click on the link if you are interested in knowing about Houston Real Estate Market.
The increasing demand for single family rental homes in Orlando has been in vogue for quite some time. Apart from this, a major portion of the population is interested in renting, and this has escalated the rent of the properties by almost 8% per year.
- Average Rent Per month: $1,360
- Average Household Income: $42,000
- Population: 277,173 (2016)
To read about Dallas Real Estate Market, click on the link.
It is an ideal time to invest in Indianapolis, with a diverse job market and all other favorable amenities close to different properties. The single family rental homes (SFR) investment has increased here by 1.3%. You can buy turnkey rental properties between $60,000 – $1, 20,000.
- Average Rent Per month: $1,180
- Average Household Income: $54,000
- Population: 864,771 (2016)
In Baltimore, the median rent comes in at $1, 431. This, with an annual return of 6.7% offers one of the best
opportunities to invest in real estate, especially in relation to single family rental homes.
- Average Rent Per month: $1,194
- Average Household Income: $38,731
- Population: 621,849 (2015)
Nashville, too, proposes a decent annual return of 5.4% after operating costs, and with the low mortgage payment of $714, it is a great market which investors should take into consideration.
- Average Rent Per month: $1,214
- Average Household Income: $66,846
- Population: 684,410 (2016)
For an in depth review of Atlanta Real Estate Market, click on the link.
If you are interested in buying Birmingham Investment Properties, click on the link.
Why are institutional investors like Blackstone buying single family rental homes in the US?
Entities like Blackstone took the plunge in investing in this small industry, as they saw it made sense if they invested in bulk. Later, it took four to five years to actually start selling the stabilized portfolios, and this eventually graduated into well-organized operating companies. In 2017, Blackstone announced $1.54 billion IPO, comprising 50,000 homes in 13 different U.S. Markets. At current prices and returns, institutional investors like Blackstone are seeing the return possibilities and profitability of single family rental home investing. Blackstone’s main motivation is to stay in the market for the long term and reap the rewards of wide ownership of rental properties. They now own 70 percent of shares in Invitation Homes, who assist in the refurbishment and sale of single family homes.
Takeaway: Stepping into single family rental homes market
It is clear to see that the U.S market for single family rental homes is ripe and rewarding for investors. More so than multi-family homes, this market deserves to be tapped in by U. S investors looking to make serious returns on their rental building ownership, resulting in a high opportunity for cash flow, and thus, more profit. Tapping into the flourishing market of single family rental homes market is quite overwhelming for potential investors at this point of time. Rental properties are overtaking the US housing market as investors are leading this pre-existing trend since last year. The urge to commit to one home or one locality has changed the overall demand for this huge real estate market.
Click on the link for the complete list of turnkey rental properties for sale in the various real estate markets of the US.
https://www.corevestfinance.com/3-keys-single-family-rental-investing/ https://www.thebalance.com/real-estate-investing-101-357985 https://www.cnbc.com/2017/02/01/blackstone-takes-its-single-family-rental-bet-public-as-sector-soars.html