Single-Family Rental Houses: A Good Investment?

Single-family rental houses are a good investment and a great place to start building an investment portfolio. When done correctly, this is one of the most effective ways to build generational wealth and create a passive income stream.

However, blindly entering an investment property deal or being ill-prepared for additional expenses or permitting requirements can cost you far more in time and money than you bargained for. It’s important to do your research and fully understand the market you’re investing in to make a well-informed and profitable decision.

Benefits of Investing In Single-Family Rental Houses

Build Passive Income

Occupied single-family rental houses Offer massive potential for passive income generation. you carry the loan and exchange for offering residents. The loan gets paid down by the occupants, and you pocket the difference after operating expenses like property management and repairs.

A Reliable Way To Build Generational Wealth

Generational wealth often follows passive income. One of the key differences of investing in rental properties is you’re not just buying an investment, your purchasing an asset. This asset is something that can be sold for short-term cash influx or leveraged to generate income long-term as a rental. Both strategies offer the potential to build huge cash reserves and begin establishing wealth for the next generation.

Property Appreciates

Not only will you make money on the rental fees, but the property itself is also likely to continue appreciating over time. This means you’ll have the opportunity to make money on the sale of the property should you choose to do that down the road.

Multiple Tax Benefits

There are multiple tax benefits to investing in single-family rental houses. you can secure tax deductions for the loan interest, property taxes, possible depreciation, and operating expenses such as repairs, landscaping, property management fees, and even travel expenses related to on-site property needs.

Community Benefits

Single-family rental homes fill the gap in the housing market for renters who prefer not to live in apartments, and yet housing is still too expensive for them, or their credit isn’t strong enough to buy. A home with a garage, a yard, and more privacy is far more appealing to the general population than cramped and noisy apartment living.

Control The Growth and Flexibility of Your Investment

Investing in Wall Street’s Stock Exchange is another common investment for building wealth. However, you simply give them your money and hope they can make more with it.

There’s not a lot of control over where the money goes, how it’s used, what you get in return, and when you can take it out. In fact, there are often huge fees for moving your money or closing accounts prematurely. By investing in single-family rental houses, you can have far more control over your investment.

Rental Property Statistics

Official research into the rental market reports that over 44 million housing units are occupied by renters in the US.[1] This number has continued to rise since 2010 and has been on an overall upward trend since 1975.

Along with the increase in renters has been the associated decrease in rental vacancies across the US. As homes become less affordable and loans become more difficult for the average homebuyer to get, the demand for rental properties remains strong.

Another study reported that one in four millennial renters planned to rent long-term or indefinitely due to the unrealistic expectations of the housing market.[2] The quintessential American dream looks different today than it did 50, 40, or even 20 years ago.

The demand is there and has been for decades. Investing in rental properties is a strong and time-tested portfolio enhancer.

Single-Family Rental Houses vs. Multi-Unit Properties

Single-family rental houses are the number one home of choice for renters, as opposed to apartments, townhouses, condos, or duplexes. In fact, recent studies show that 42% of renters in the US were living in single-family homes.[3]

While apartment complexes offer strong cash flow possibilities, there are simply more renters interested in homes with space, yards, parking spaces, and more privacy than in multi-family structures.

Other Considerations Before Investing In Single-Family Rental Houses

Building A Team

Something that many new investors often overlook is the importance of building a team. The most profitable passive income properties are the ones that have a multi-layered team, each member bringing their own area of expertise to the table.

Single-family rental houses are a strong investment when you’re working with a knowledgeable and well-connected broker, a high-quality contractor, and an experienced property manager and have access to multiple streams of financing. This requires a team made of high-performance individuals that you trust and can build a lasting working relationship with.

Develop Multiple Financing Channels

While signing on the dotted line with your local credit union or conventional lender may be where you need to start, don’t stop there in terms of pursuing property financing options. As a skilled real estate investor, it is mission-critical to be able to access the funds you need to close a deal.

Whether that’s through creative owner financing deals, hard money loans, or private lending channels, what funding source works for one deal may not work for the next.

Be ready for not just the deal you have on the table today but the next deal you have in the pipeline. Continually pursue relationships with investors, learn about transactional funding, and make your deal appealing to private lenders like friends and family.

Don’t Fall In Love With The Property. Fall In Love With The Deal.

One of the number one things that trips up new rental property investors is getting hung up on a specific property. This is also the number one thing our real estate firm tells every new investor not to do.

It’s never about the property. It’s always about the deal.

It has to be a good deal and a good area with strong financing to be a profitable investment. This means it doesn’t matter how cute the house is, how big of a vision you have for flipping it, or even the low price tag. If it doesn’t make sense as an investment, it just doesn’t make the cut.

Need more guidance on how to make the most out of your investment portfolio? Contact a member of our team today.