Using Single-Family Properties to Begin Your Investing Journey - 9 Important Benefits
In the world of real estate investment, there are plenty of options when deciding which properties to begin buying. However, there is one type of property that shines as a popular option for veteran and new investors alike – the single-family rental property.
Regardless of the challenges facing the economy, occupancy rates for single-family properties are reliably over 95 per cent most of the time. This makes them a very safe investment because you can usually expect to find a tenant for your property quite easily. Despite this, it is important to remember that like all investments, there are no guarantees, and you need to be aware of the risks before you begin buying.
So, let’s take a closer look into the reasons investors flock to single-family properties and why they are a solid option for new investors entering the market.
However, before we dive in, if you would like to secure the best financing for your upcoming investments, click the link below to get started today with a free strategy call to discuss your options.
The 9 Benefits of Investing in Single-Family Properties
1 - Cash Flow
One of the goals shared by investors is the generation of passive monthly cash flow from their rental properties. The money earned through rental income each month has the capability to cover the mortgage, utilities, and insurance of your properties, while also bringing in extra cash you can use to fund your lifestyle or continue to invest.
To give you an example, if you buy a two-bedroom property for $200,000 that costs approximately $1000 per month after your expenses. In this situation, provided the local market supports it, you could charge $1600 each month in rent, generating $600 in passive income each month. If this remained the same each year, you could earn a total of $36,000 over the next five years. This money can be used to buy another property, pay for your lifestyle, or be redirected into other forms of investments. However, as the property increases in value you will also be able to increase your rent, creating even more room to profit.
2 - Tenants Stay Longer
When investing in rental properties, one of the primary risks you face is the fact that your cash flow disappears once your tenant moves out until you are able to find a new one to take their place. So, you want to find properties that are going to have a very low turnover rate.
Single-Family properties are great for this purpose because tenants have fewer reasons to think about moving. This is sometimes referred to as tenant ‘stickiness.’ Some of the reasons these properties are ‘stickier’ than others include:
3 - Privacy
These properties offer an increased sense of privacy as opposed to apartments. There are no shared spaces or walls with any of their neighbours which allows them to feel more comfortable and at-home. They also do not have to deal with as many sounds or scents coming from neighbouring units.
4 - Location
Single-family properties are often built with the intention to build communities, which means these properties are often positioned closer to schools, parks, and grocery stores, alongside plenty of other amenities that tenants will not want to move away from.
5 - More Space
Single-family properties offer more space to your tenants than multi-family or commercial properties. This includes benefits such as larger living spaces, kitchens, bedrooms, and private laundry areas which they may not have had if they were to rent an apartment.
6 - Storage
In addition to more space to live, single-family properties also offer more room for your tenant to store their property. This is great for people who love to have seasonal decorations such as Christmas trees, Halloween decorations, or Easter décor. This also allows your tenants to have space for things they may want but not always need such as specialty kitchen appliances.
Discover How To Apply For An Investment Property Mortgages With This Step By Step Guide
7 - Low Maintenance
Single-family properties are not only great for maintaining tenants, but they are also often more low maintenance then multi-family or commercial properties. This may not be immediately obvious because one would assume that more space would mean more maintenance. However, since tenants in single-family properties often view the property as their home anyways, they are much more careful and willing to handle smaller tasks to keep the property well maintained.
Tenants in these properties are also typically quicker to let you know when a serious problem arises, allowing you to take it care of it earlier before it has the time to worsen and become more hazardous and expensive to handle.
8 - Appreciation
Buying single-family properties is also advantageous due to how reliably they appreciate. Over the last 15 years, Canadian housing has seen an average 6.11 per cent appreciation in property values. This beats out the average rate of inflation, meaning your money is doing a lot more while invested in real estate as opposed to sitting in your bank account effectively losing value year-over-year. While your property appreciates, you will be able to increase rents accordingly when possible and see some of these profits immediately reflected in your monthly cash flow. Otherwise, when you decide to sell or refinance, you will be able to cash-out on the value that has been built in your investment.
9 - Easier to Finance
Finally, single-family properties are very beginner friendly because they are some of the easiest properties to secure financing for. After all, lenders will not have nearly as many questions or reservations regarding your plans for a house than a duplex or apartment complex because they are simpler properties.
As well, the financing process is often very similar to the process you would undergo buying your own principal residence, with only a few differences to account for your plans to use it as an investment property.
If you are ready to begin investing or would like to take some time to ponder your options. Our team at LendCity is ready to help you. So, feel free to contact us to book a consultation or apply for financing on your next real estate deal today. Our website is LendCity.ca, and we can be contacted at 519-960-0370.
Alternatively, click the link below to book a free strategy call with us today.