Real estate has consistently established itself as a lucrative investment that many people turn to in hopes of accumulating wealth. Among the various options, single-family homes stand out as a popular choice. Naturally, there are pros as well as cons associated with this investment. Let’s explore …
One of the main benefits of investing in single-family homes is the potential to earn a consistent stream of rental income, making it a highly desired investment option. Another benefit is that single-family homes typically increase in equity value over time, thus rewarding patient investors. On the other hand, single-family homes may require high maintenance costs. Further, market fluctuations such as interest rates can impact their value, exposing investors to potential risks. And lastly, managing multiple homes can be time-consuming as it is very hands-on, especially regarding tenant-specific issues. One option is to hire a property manager but that expense means reduced cash flow.
According to Moneywise, if an individual is interested in investing in a single-family home without the responsibility of being a landlord or incurring the cost of buying a property outright, there are many platforms that offer unique single-family investment options. Options range from buying shares of a portfolio of properties to purchasing tokenized shares of physical real estate assets.
Forbes discusses a technique to determine a solid investment opportunity known as the 1% rule. The 1% rule gauges the relationship between an investment property's purchase price and its gross income. To meet this rule, the property's monthly rent should ideally amount to 1% or more of the purchase price. This guideline assists investors in assessing whether they can break even on the property.
When investing in a property remotely, it is important to conduct research on the neighborhood and surrounding area as well as familiarize yourself with local property laws to fully grasp the particulars of your investment. Furthermore, finding a quality property management company is crucial for investors seeking properties in other states since it will be more difficult to physically check up on the investment.
There are many benefits to owning/investing in single-family homes. Still, it is important to consider market conditions, maintenance costs, long-term vs short-term investment goals, personal involvement and more before diving in.