Why single family homes make for great investments
Looking to make the jump to becoming a real estate investor? It can certainly be hard to know where to start. You can take classes, research the industry, take out advice from experts, check out informative websites, even get your real estate licence and still, taking the leap can be scary.
So, let us give you one small piece of advice to help you on your way: invest in a single-family home. Why? Check out these six simple reasons.
To make it as a real estate investor, you have to be turning a profit, making investments that will grow over time or be able to generate a stable income from rental payments. One of the reasons a single-family home makes the ideal real estate investment is that it is a hybrid investment meaning they provide rental income but their retail value is not directly tethered to that income. To put it simply, the value of a block of flats will rise and fall depending on how much rent it is producing but, even when left vacant, a well-maintained house in a desirable location will rise in value!
Safety and faster appreciation
When done prudently and intelligently real estate is a relatively low-risk investment, however, no investment is ever completely without risk and, when it’s your money on the line, you sometimes have to make the safer choice. When making a first-time investment it is worth considering that single-family homes generally cost less and are quicker to appreciate in value compared to their other counterparts. You’ll be able to turn around, profit and leverage your investment in no time! This is important because, when times are tough and you have to take our a loan from a bank, bankers prefer to loan money against a solid single-family home rather than a large commercial property or a stock portfolio making them valuable investments.
An evergreen market
If you’re in the market for a single-family home, you’re almost always guaranteed to be able to find exactly what you’re looking for! While office buildings, apartment blocks and commercial properties are rarely placed on the market, single-family homes are constantly being listed for sale. The needs of a family change over time and a myriad of factors from growing families, changing jobs, longer commutes, divorce, downsizing or changed financial situations lead families to vacate much-loved family homes! Even breaking it down to a numbers game you will find that there are more single-family homes in any average neighbourhood outside the CBD than other listings so there are plenty of fish in this particular sea!
Compared with apartment buildings and commercial offices, the tenants you have at your single-family homes will undoubtedly be your favourites. More self-sufficient, responsible tenants usually with children and busy lives of their own. These tenants tend to pay reliably, on time and take great care of the property.
Diversify your investment portfolio
One of the key things you should do to lower the risk you take on when investing is to diversify your portfolio. Basically you don’t want to have all your eggs in one basket. Even seasoned investors sometimes make poor choices or see their properties depreciate in value due to circumstances outside their control such as a major development or natural disaster. Owning single-family homes rather than larger occupancy buildings allows you to make multiple investments in different locations so, if one location becomes a liability, your other locations will still be flourishing!\
You can be your own property manager
Being responsible for a building with many tenants can be a full-time job. Managing the concerns, maintenance, building politics and taking care of upkeep can be exhausting which is why most investors end up hiring a property manager. While a property manager will take some of the tasks off your plate, they also cut into your profits with their salary coming out of the income you would typically make from rent.
With a single-family home, there are far fewer fixtures to maintain – just one furnace, one set of pipes, one washing machine meaning there are fewer appliances that could fall into disrepair. Occupants in single-family homes also tend to feel more of a connection to their properties and may even take on the responsibility of making small repairs themselves! The reliable tenants and fewer number of repairs that will be needed means that you can be your own property manager!