There has never been a more ideal time to invest in Single family rental homes than Right now. Record low interest rates and high demand for rentals has created the perfect opportunity for investors to buy and hold. There are still many investors whose preference is to fix and flips rehabs and there certainly is nothing wrong with that; but, it’s always best to have a diversified portfolio. Tenant horror stories and potential issues with the property scare off many investors. Truly these are the exception rather than the norm. Focusing on the positives you see all the benefits associated with rental property ownership. While there are many reasons to consider investing in single family rental here are the top five
Cash flow. A rental property can generate cash flow easier and faster as opposed to a rehab where you get a lump sum at the end once the property is sold. Many investors preferred a monthly method of collecting checks. The monthly cash flow amount is dependent on the purchase price, expenses and rent received, with the right property you can easily generate hundreds of extra dollars per month. With this money you can pay down debt, accelerate mortgage payoff, ramp up marketing or simply increase your savings. This is made possible by finding and having good tenants in place. Every month money will come in from the rent collection. During slow phases of your business you will appreciate the consistency of a monthly cash flow.
- One of the differences between a buy and hold rental purchase and a rehab deal is the way we can leverage our resource. With a Rental you can borrow against its equity to purchase another property; which, would then give you more rental income. If you are rehabbing a property you have income going out and nothing coming in, until it sells. The use of leverage some of the biggest real estate moguls across the country have multiplied their wealth with the use of leverage. They are efficient at raising money to come up with the down payment and enjoyed the perks of cash flow as well as appreciation. Each time a tenant makes their monthly rent payment it accelerates the payoff of the loan. You can own the property for years and have a good chunk of equity solely based on your tenant’s contributions. As equity increases you can either sell it for a profit or consider taking cash out to use in other areas of your business. One way to Own it free and clear fast is to use every extra dollar you can to pay off the loan as quickly as possible. Once the loan is paid off you will then have 100% of the cash flow and can live strictly on this income. It process may take a while; but, this is definite long-term potential with a rental property.
- Tax benefits. There is a tax advantage to being a landlord. There are write offs and deductions that can completely change your tax return in your favor. In addition, you can also write off your mortgage interest, any repairs, mileage and updates to the property. Many times a break-even rental yields thousands of positive tax return dollars. It is pretty straight forward and your accountant doesn’t need to get creative to utilize the tax benefits that are available.
- Ease of exit. Owning a single-family rental, does not restricted in any way with your buyer pool. A single-family property attracts first time homebuyers just as easily as buyers relocating or looking to downsize. You are not restricted into selling to fellow landlord and do not need the market to change in your direction. Single family properties are the most abundant property type and the most desirable. Two and three family properties may produce a higher upside but also need a niche buyer, usually an investor. With a single-family property, you can easily get out of it and sell whenever you want without too much standing in your way.
- While there are pros and cons as with everything in real estate. Single family rentals are no different. You should consider adding a single-family rentals in your portfolio as another strategic way for generating income.