If you think real estate investment is reliable, consider investing in rental properties. Single-family rentals (SFRs) are difficult to surpass when it comes to alternative investments in the current period. Single-family rentals create two streams of income, appreciate the house’s value, and create a consistent income source.
Rental Property Trend
Single-family rentals (SFRs) have evolved into the fastest-growing rental housing sector over the last 15 years, delivering high returns through appreciation and rental income. Single-family rentals have steadily climbed by nearly 3% every year since 2010. Today, they represent one-third of all rental housing in the United States, with 15-16 million residences. Furthermore, single-family rental investors represent 15-20% of current house sales, while “built-to-rent” homes are trending these days.
What is a Single-Family Rental?
Single-family homes are distinct real estate asset types. They are houses with a yard and a garage commonly found in suburban communities. SFRs have several advantages over other forms of properties. They are less expensive to buy and manage, and the renters typically feel a stronger sense of ownership, encouraging them to remain longer and take greater care of the property.
Benefits of Rental Properties
Rental properties are flexible to almost any circumstance. They’re ideal for young families who want to purchase but can’t afford them in today’s hot markets. They’re beneficial for owners planning to relocate immediately; retirees who have sold the family residence; sales associates who constantly relocate; and families who don’t have the credit or funds for a down payment. Many people prefer to live in an excellent school district or commute to work for a fraction of the expense of owning.
No Repair and Maintainance Costs
One advantage of renting a property is that there are no maintenance or repair expenditures. It implies that if you rent a home, your landlord is fully responsible for all maintenance, renovation, and repairs. If an item stops working, you notify your landlord, who is obligated to repair or replace it.
Flexible Living Choices
Renters can live almost anywhere, whereas homeowners are limited to places where they can afford to purchase. It is hard to buy a home in major cities such as New York or Paris, but you may enjoy living there as a renter.
Fixed Rent
The rent you pay is fixed for the duration of the lease agreement. While landlords might raise the rent after notification, you can plan your budget more effectively since the amount of rent is fixed.
How to Invest in Rental Properties
The single-family rental market is growing, with more and more investors. Before investing in a single-family rental home, there are various variables to consider.
- First, establish your investing criterion. Do you want cash flow or capital appreciation?
- Determine how much money you have to invest.
- Finally, decide which markets you are familiar with and wish to invest in.
Today, several corporations can assist you in locating all of the services you want to begin investing in single-family rental houses. They can help you purchase properties, market to potential renters, identify and screen tenants, and maintain tenant relationships. As a result, you become the owner of a rental property with a fixed monthly income.
Reasons Why SFRs Are Profitable Investments
SFRs are also more profitable investments. Here are a few main reasons why single-family rentals are a good investment.
You Can Invest More Capital Than You Own
Assume you want to invest $250,000 but only have $50,000. It is possible to purchase with SFRs due to leveraging, a frequent investing method in which buyers borrow money to boost profits. Your $50,000 down payment permits you to obtain the remaining $200,000 loan to buy the property through mortgage or house loans. Furthermore, you are earning rent, and the appreciation in property value is multiplying your 50,000 five times its original value.
A More Stable Investment Than Stocks
Rental property is the most stable investment. Over the last 25 years, average yearly returns on single-family rentals were comparable to those on equities and bonds but with significantly less volatility.
Source of Fixed Additional Income
Although there are some obvious expenditures in rental properties, you can earn consistent and predictable income if you have a trustworthy tenant who enjoys living in your property. Other methods to invest in real estate include real estate investment trusts (REITs) and crowdfunding. Still, they don’t necessarily produce the same income flow as 100% ownership of a single-family rental.
Bottom Line
Property investing isn’t for everyone, but it may benefit homeowners long term because of the amount of home equity they gain. It also provides various advantages to tenants. If you are interested in rental property investment, you must gain complete knowledge about the market.
