The Advantages of Investing in Single-Family Homes

Savvy investors know that investing in rental real estate is the number one way to create reliable income streams, build great wealth, and secure financial independence. But what type of property is successful at achieving these sought-after characteristics? In my opinion, the answer is single-family homes. Multi-family duplexes are also a great investment, but I’m going to keep it simple here and focus on the basic single-family home, an asset type that I built my portfolio on and my net worth.f

Let’s dive in and find out why I love single-family rentals so you can decide if they’re the right fit for your investment goals.

What Makes Investing in Single-Family Homes So Attractive

Investors typically have their sights set on a few key benefits when they decide to start their real estate journey – creating passive income that’s secure and steady, building a retirement fund that they can actually live on, and gaining financial independence. I know from personal experience that all these elements can be achieved when you invest in rental real estate, especially single-family homes. Here are the main reasons why I believe this to be true:

Tenants Stay Longer Creating Reliable Income Streams

One of the key attractions of single-family homes is their reputation for providing a consistent and reliable revenue stream. This is possible because tenants who live in these property types tend to stay for the long term; 3, 5, or 7+ years. Why is this the case? Well, I believe these renters love living in a home. Let’s face it, apartments offer small square footage, people living below you, to the right and left as well, and there’s no yard, so children are forced to make a parking lot their playground – doesn’t sound like the American Dream, does it?

When these same people, who might not be able to afford to buy their own house, can live in one by just renting it, they have the opportunity to live in a real home, a place they can call their own – complete with a yard, porch, driveway, a larger living space, and so on.

So, it goes without saying that all these home perks are compelling reasons to stay put, providing the property owner with a stable income stream for years to come. This scenario also enables the landlord to avoid high turnover costs and vacancies, especially when the property is located in a good neighborhood that has a great school district.

Better Financing Options for Single-Family Property Investments

Banks often show a preference when the loans are for single-family rentals, largely due to the stability and safety these investments carry. Single-family homes are perceived as less volatile compared to, let’s say, apartment complexes that have high tenant turnover rates and drawn-out vacancies. The banks also find single-family properties more reliable because they’re in such high demand, especially in recent years, as the affordable housing crisis and housing shortage have caused potential homebuyers to be funneled into rentals.

With a larger pool of prospective tenants, and a low inventory, investors of single-family houses are able to be more selective with who they allow in their properties, all while finding a tenant very quickly. This increased selectivity typically results in more reliable tenants, which in turn minimizes financial risks for both the investor and the lending bank.

Another factor the banks find attractive is the relatively lower start-up capital required for investing in single-family homes, compared to large multi-unit properties, which often come with a hefty price tag and complex management needs. Single-family rentals present a more straightforward and accessible investment option, and this lower barrier to entry not only makes it easier for investors to secure financing but also reduces the financial risk for banks.

Holds its Value – Proven Record of SFH Equity Growth Over Time

Single-family properties hold their value compared to commercial apartment complexes. Why? Because their value is based on the neighborhood they sit in and the value of the houses that surround them. So, even if a home were to sit vacant for six months, it wouldn’t affect its value. In fact, the property’s worth may even increase during that time due to natural appreciation.

In contrast, a large multi-unit property’s value is mostly based on its performance and ability to cash flow. The bottom line is that single-family homes have historically increased in value over time and this characteristic can significantly elevate your equity, serving as a tool for wealth generation through leverage. See our article – Investors Buy to Secure Equity as Home Prices Continue to Rise, to get an idea of how equity works.

You Can Easily Diversify Your Portfolio with Single-Family Rental Properties

Ownership of various single-family properties across multiple locations offers a protective hedge against the fluctuation of local markets. This diversity can stabilize your investment portfolio, ensuring a more predictable wealth accumulation journey. However, if you get set up in a location that has been properly vetted to ensure the rentals in that area will perform for years to come, you won’t really need a diversification strategy that requires buying properties across multiple locations. You can read more about this in my article – Why Location Matters in Real Estate Investing – Tapping into Profitable Rental Markets.

In addition to this, with the unpredictable nature of the stock market, investors are increasingly drawn to alternative investments like a stable single-family home since they’re less susceptible to volatile market shifts.

For those who have all their wealth wrapped up in the stock market through a traditional retirement account such as a 401(k), you may have been hit when the pandemic made its appearance. Many people had their 401(k)s drained when the market crashed at this time. It was especially devastating for those set to retire that same year, and this should serve as a wake-up call to invest in a stable asset class that doesn’t waiver during economic disasters. I can say for certain that rental real estate is a safer bet than stock-related investments.

If you’re not convinced, then dive into our article on the topic – Why the 401(k) is a Bad Investment Vehicle. You’ll also want to take a look at our pandemic-related post that reveals why the right location is so important – Lubbock Recognized as Recession-Proof City and Maintained a Strong Rental Market Throughout Pandemic.

Power Resources for Real Estate Investors

• The Financial Freedom Academy
• Freedom Number Cheat Sheet
• 90-Day Financial Empowerment Bootcamp
• Morris Invest & SDIRA Program Overview

Start Your Wealth Building Journey with a Secure Cash Flowing Rental Property

Investing in single-family homes presents a golden opportunity for wealth building and allows the investor to benefit from the essentials – stable income streams, lower vacancy risks, potential for faster appreciation and equity growth, and easier financing options. Each of these benefits contributes to a solid framework for financial growth and stability, bringing you closer to your goal of becoming financially independent.

With all that said, whether you’re a seasoned investor or just beginning your real estate journey, we can help you reach your investment goals. We can easily provide you with a new construction single-family home in an exceptional neighborhood located in a city with a thriving economy – basically setting you up for success. If all this has sparked your interest,  feel free to schedule a free 30-minute call – we would love to speak with you and hear all about your investment goals!

Take a moment to watch the following video where you can catch a glimpse of single-family homes that Morris Invest built a few years back:

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