If you’ve been following real estate news in recent months, you’re aware that interest rates are on the rise and housing demand has slowly started to fall. While this might be bad news for first-time home buyers interested in securing a primary residence, it’s excellent news for investors. Here are some of the reasons why single-family homes continue to make excellent investment properties.
Single-Family Homes are Great for Beginners
If you’re brand new to real estate investing, a single-family home is the best place to start. Not only is it the most affordable investment option, but it also provides you with the most choices down the line. You could buy the home, renovate it, and then sell it at a profit in a classic fix-and-flip project. You could also buy the home, renovate it, rent it out, refinance it, and repeat this process (the BRRRR method of real estate investing) to slowly build yourself a valuable portfolio over time.
Rental Demand is Rising
Although the demand for mortgages (and therefore primary residences) is falling, the demand for rental properties continues to skyrocket across the country. Families who aren’t able or willing to purchase a house at a 5% or higher interest rate still want the comfort of living in a house, and because of that, single-family rentals are seeing the highest demand they’ve seen in years. Investors who own multiple single-family properties stand to benefit significantly from the high demand and rising rents.
Single-Family Homes attract Long-Term Quality, Tenants
There’s a major difference between renting apartments and renting single-family homes. Apartments are more affordable, which means they are more attainable for the average family. However, families who can afford to do so prefer to live in single-family homes for the additional privacy, quiet, and comfort they can offer. Furthermore, when you find quality tenants who care for the property and pay their rent on time each month, and when you fulfill your side of the agreement by ensuring the home is in good condition and repair, these tenants stick around for five to 10 years or more – even through moderate rent increases. This means that single-family properties can generate higher and more reliable profits over a longer period than apartments.
Single Family Home Values Appreciate Quickly
Despite the plateaued home values in many parts of the country, the truth is that most single-family homes kept in good repair will almost always appreciate over time. This means you can buy a home today for $200,000, rent it for $1500 a month, and pay for that home in about a decade with the rent you collect alone. In that same decade, the value of that home may increase by another $50,000 to $100,000 or more depending on the location and market. At that point, you can sell the home for a profit or continue to rent it to enjoy a passive income.
United Lending LLC helps hundreds of investors purchase single-family homes every single year. We specialize in real estate investing, and we offer rental loans, bridge loans, and more that are designed to help our clients maximize their profits and grow their wealth.