The Tried and True Reasons a Single-Family Rental Pays Off
11 Jan 2022
5 min read
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The ways you can invest in real estate today are endless. You can choose from fix-and-flips, ground-up construction, short-term rentals, and countless other options!
But what can get overlooked in all of the new-fangled places to invest your hard-earned cash is one traditional, safe and time-tested way to grow your wealth: the single-family rental.
Of the ways to earn passive income, a single-family rental provides steady returns with minimal hassles and few barriers to entry. Read on to find out why you should consider a single-family home for your next investment.
The Data Is In Your Favor
Historically, single-family rentals have been a safe haven for investors who wanted to enjoy two benefits at once. They could produce short-term rental income while also seeing the value of their investment property grow consistently, year after year.
In fact, between 2010 and 2019, rents steadily grew an average of 3% per year, and home prices grew an average of 4% per year. That means that single-family rental property investors got to double-dip in that growth as the value of their assets increased over time.
Then, the Pandemic happened, and those benefits went into overdrive. Real estate demand sharply increased, especially for single-family homes. In October 2021, rents hit a record high increase of 10.9% year-over-year. On top of that, the national rental vacancy rate is currently at its lowest rate in 40 years - at only 5.8%. This makes single-family rentals a hot commodity.
And while daily life is slowly returning to pre-pandemic conditions, certain developments are here to stay - like working from home. This helps Millennials and Gen Z fully embrace their more mobile lifestyles. These generations don’t value homeownership as heavily as their predecessors. Only 59% of Gen Z see homeownership as the pinnacle of the American dream, compared to 87% among senior ages 68 and up. Less desire for purchasing a property means single-family rental investors are sure to see demand grow for years to come.
Fewer Problems, Greater Profits
In regards to tenants, you may think that more tenants means more money. And often, this is the case. However, single-family rentals in your real estate portfolio not only mean higher rental income per property; you also get to enjoy less headaches.
For starters, the property tends to be smaller with less items that cause common maintenance issues, such as toilets and appliances. Additionally, you don’t have to deal with squabbles between tenants, such as a neighbor being too loud or parking in someone else’s parking space.
Another reason you can expect fewer issues with a single-family rental is that the pool of candidates for these properties stay in a property longer and are less likely to become delinquent on rent. This means you won’t have to worry as much about constant turnover of tenants or chasing renters down for late payments.
With higher income per unit and fewer problems to handle, you’ll be free to use your extra time and energy to scale your rental property investments - or simply enjoy some peace of mind.
Minimized Risk Means Greater Accessibility
Adding a single-family rental to your investment portfolio and getting it rented out is much easier than purchasing or developing a multi-family property.
To begin with, the capital needs are lower, and there are simply more single-family properties available for purchase. Due to the ability of single-family homes to hold their value over time and their higher level of demand in the real estate market, they come with less inherent risk and are easier to get approvals for financing. Should you choose to exit the investment in the future, you’ll find it much easier to sell a single-family rental than other potential real estate investments.
Discover Your Options
If you’re ready to add a single-family rental property to your portfolio, Temple View Capital is an excellent place to start. Our team of experienced professionals can help you find the right rental property financing for you.
All you have to do is let us know here how to contact you. Temple View Capital’s specialized private lending team will reach out to you and get the process started.