Published by REI Club
Of the investment properties available on the market, single-family homes often accrue the greatest appreciation rates and are most sought after by high quality tenants.
Single-family homes are an asset to any investor—large or small. Of the investment properties available on the market, single-family homes often accrue the greatest appreciation rates and are most sought after by high quality tenants. In addition to holding lower upfront costs, single-family homes are often easier to secure financing for as they are considered residential properties, even if you plan to use them for commercial gain.
For investors, single-family homes hold no portfolio requirements. This means that an investor of any caliber can purchase single-family homes for investment purposes, regardless of how large or small their current portfolio is. As they are easy to secure financing and lower in upfront cost, single-family homes are the perfect catalyst for first time investors to begin building their portfolio. For those with an already large investment portfolio, single-family homes are an easy way to quickly add numbers to the current cash-flow.
For those looking to kick off their investing career with the purchase of a single-family home, there are a few factors which you should keep in mind when getting started.
Location
One of the most important factors to keep in mind when investing in single-family homes is location. It is vital to ensure you are purchasing a property in an area of high rental demand. The majority of tenants look for single-family homes. Make sure to verify school rankings, crime rates, and proximity to amenities such as hospitals, grocery stores, and entertainment.
Keep in mind that as you begin to build your real estate portfolio, it is important to diversify. Diversifying your portfolio helps protect you in the event of an economic setback in a particular market. With the increase in technology and the help of an experienced property management company, investing out of state has become relatively simple in comparison to previous years. This allows you to protect yourself with a diverse portfolio and select homes in various markets.
Research
Before making any purchase always ensure you take time out to research the area and the property itself, as well as any contractors or agents you will be using throughout the process. Trulia.com offers a great search overlay that let’s you explore neighborhoods, schools, see crime, traffic, nearby restaurants and much more.
Real estate agents and brokers can be a useful tool when researching an investment, but shouldn’t be the crutch you use to lean on throughout the process. It is important for you to do your own research and compare your findings with their information. Without research, you cannot truly be sure that you are getting a good deal.
Working with a qualified, experienced agent is a great way to further enhance your knowledge as they will have connections and familiarity with the area. When you combine your own research with the help of a local industry expert, you are more likely to walk away with a successful business venture.
Calculating Numbers
Similar to doing research of the area you are looking to invest in, it is important to do the research on the property you are looking to purchase. Calculate the numbers, analyze the figures. What will your initial investment be? Will you be financing or purchasing in cash? If financing, how much of a down payment are you looking to put down? Determine the approximate mortgage payment and factor in insurances and taxes. Compare that to the average monthly rental rate in the area. Consider other expenses, such as property management fees and monthly maintenance, as well.
If you plan on rehabbing the property, make sure to factor those approximated costs into your figures.
