Single family homes are a surefire way to succeed in real estate investing. Some might even call a SFR, or single family rental, the ideal investment property.
And what’s not to believe that SFRs can be ideal? They are reasonably priced, financially productive, and heavily desired investment properties. Whether SFRs are truly ideal or not doesn’t matter, what matters is that you invest wisely in them. How can you do that? By following these real estate investment tips!
Related: Why Is a Single Family House the Best Investment Property?
Tip #1: Look for a Killer Location
You’ve heard it once, you’ve heard it a million times: location, location, location. How well your income property can thrive in the rental market will depend largely on its location.
Location is vital, no doubt about that, but it may be even more important with SFR investment properties. Over half of all rentals are SFRs, so to really make your investment property stand out, look for a location that stands out.
The best real estate investment tips when it comes to location with SFRs include finding a real estate property that isn’t in the cityside and a location with good standards of living. The most common tenants of single family homes are, you guessed it, families. For that reason, most SFRs are in the suburbs. To spice up your rental property’s appeal, find a property close to areas that attract families. Examples can range from entertainment and recreational facilities, like movie theaters and shopping centers, to academic areas, like school districts.
Tip #2: Define Your Purpose
Alright, so you’ve found a location for your investment property. But what are you planning to do with it?
Since you happen to be on our site, you are likely an aspiring or experienced real estate investor. In that case, you are probably aiming to buy a SFR for renting purposes. There are still real estate investing questions to ask yourself, however, like: How do you want to rent out the property? One of the many things that make SFRs great investment choices is their flexibility. You can decide to rent them out through traditional or Airbnb rental strategy. Also, you could choose to have this investment as a full-time deal or as a part-time job. Heck, you may not be interested in renting at all. You may want to purchase the property as a home!
Whatever you opt for, just consider the second of our real estate investment tips: set an investment strategy. If you want to rent, set a rental strategy. Have an idea of what you want to do with your single family home.
Tip #3: Break Down the Property
After you’ve searched for a rental property, which you can quickly do with Mashvisor’s property search, analyze it. This is one of the real estate investment tips that will require significant attention.
There are many things to consider when analyzing a single family rental property. The first, and most obvious, is its financing. We’ll get to that soon. Another aspect to consider is its potential return on investment.
There are three general metrics of return on investment in real estate. They are cash on cash return (CoC return), cap rate, and most importantly, cash flow. To keep it simple, if you search with Mashvisor, the projected returns will be automatically calculated depending on certain data you enter. Mashvisor’s rental property calculator also has other unique and accurate ways of analyzing an investment property. Make sure your potential SFR scores high in terms of its investment opportunity.
Tip #4: Get Your Finances Straight
Single family homes are generally some of the least expensive real estate properties out there. Their lower prices also make them easier to purchase! Capitalize on this. In fact, here’s one of our bonus real estate investment tips: do not ignore advantages, such as this one!
There are many ways to finance an income property. Obviously, some ways are less risky and easier than others. Whatever financing method you opt for, it is recommended (and required for many methods) to have a good credit score and cash reserves. Work on building these two facets of financing, especially if you want to qualify for a mortgage.
Related: 9 Ways to Invest in Real Estate with Little or No Money
Tip #5: How Do You Like Your Management?
A reason why SFRs are cheaper than most other real estate properties is because they are smaller in size. This reduced size also translates into management and its expenses, which means lower maintenance costs!
Because single family rentals do not require too much management, you can opt to manage them by yourself. But, if you are investing in multiple properties or do not have the time to manage a SFR by yourself, consider the next tip on the list of real estate investment tips: professional property management.
Related: Professional Property Management: When is it Worth the Money?
Tip #6: Plan for Other Expenses
Unfortunately, management is not the only activity that requires expenses. Mortgage payments, taxes, and Airbnb fees (if you opt for Airbnb) are other expenses you need to account for. So, that leaves us with more advice in our line of real estate investment tips: plan wisely for other expenses. And if you’re familiar with us, then you know that Mashvisor can help you do this!
Tip #7: Work Towards Cash Flow
And finally, perhaps one of the most important real estate investment tips of all, is to focus on your cash flow. Your cash flow needs to be positive, no negatives are allowed.
Luckily with single family houses, you are at another advantage. SFRs already tend to have higher positive cash flow than other types of rental properties. A reason this is the case is due to tenants’ paying for their utility bills, which are normally covered by the landlord in other types of investment properties.
Still, don’t sleep on this higher chance to grant you positive cash flow. Make sure you plan accurately, act efficiently, and spend wisely to generate and maintain positive cash flow.
Single family homes are well known for being superior real estate investments. Ideal? We’ll leave that up to you. What we do know is that with these real estate investment tips, you’re many steps closer to ideal.
For more real estate investment tips, visit us at Mashvisor!