Single Family Homes

I SWEAR.

​When I'm in REAL ESTATE mode...I'm IN REAL ESTATE MODE.

What do I mean by that?

Well, within the last 5 months, I sold a house. I bought a house. I bought a duplex. And now, I'm ready for the next investment.

What's my grand strategy for this next investment, My Fourth Property? To be honest, I'm really not sure yet. I plan to deploy about $25k-$35k for this next investment, so I definitely have options. But again, I need to weigh different strategies.

So let's take a look at the first investing asset class I'm considering: SINGLE FAMILY HOMES

Technically, this is where I have the most experience. Which isn't a lot. But, I've purchased 2 single family homes and also sold one. Let's touch on the Pros and Cons of investing in single family homes.

My First Single Family

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PROS

• One of the most affordable investments. You can find quality cash-flowing properties for less than $100k.
• Longer tenant leases. Tenants in single family homes usually stay longer than tenants in multi-family. This might be because there's a higher sense of ownership, and single family properties often attract families, where stability for the kids is more of a priority. Longer tenant leases and less turnover increases overall ROI.
• Best chance of appreciating in value and holding resale value. Single family properties have a larger buyer pool (which means demand) because you're not only factoring in investors, you're factoring in a large pool of retail buyers. You know...the people that aren't looking to necessarily buy an investment...they're looking for their first house, or to "upgrade," or to find their dream house.
• Reduced operating expenses. Owning less units often = less expenses. By default, with only 1 unit, you easily should have much lower expenses than a multi-family. That's less toilets to have to fix, less furnaces to replace...

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CONS

• Single family properties don't take advantage of the economics of scale. For example: a new roof on a single family house (1 unit) will have a similar cost for a roof on a duplex (2 units).
• When you have 1 vacancy, you have 100% vacancy. If you're in the middle of turning over your property and it's vacant, you very well might have to pay a full mortgage payment on your own. With multi-family, 1 vacancy hurts, but you should at least have income coming in from the other units.
• It can be hard to scale with single family homes because of the management and work required to keep the portfolio running smooth. Would you rather own 100 houses? Or one 100-unit apartment building?
• Opportunity cost....in terms traditional financing. You can only get 10 loans under your name. Do you want to use one of those slots for 1 unit?

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My Second Single Family

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As you can see, there are plenty of PROS and CONS to evaluate when buying a single family home. I'll say this: because I started off with this asset class, and a lot of investors do, it's a great way to get started. It's a great way to "ease" into real estate by keeping things relatively simple. I really got my real estate education from single family properties and I'll never forget that!

Key Takeaways

• Evaluate your investing priorities. Single family homes offer a great option if you're just starting out because they are generally cheaper than a duplex or larger multi-family (if you're looking in a cash flowing neighborhood), they generally have longer tenant occupancy rates, and they hold resale value (if you buy in the right neighborhood).

​-Tyler

Next Post: Small Multi-Family