Should You Invest In Single-Family Rentals?

Many people who invest in rental properties buy duplexes, quad-plexes, or other multifamily homes. But there is no rule that says these are your only options. You can also buy and rent out single-family homes. However, as with any big purchase or investment, it's important to weigh the pros and cons before you take the plunge and commit to this endeavor.

Pro: You have more homes to choose from.

In most areas, there are more single-family homes for sale than multi-family homes. This is because multi-family homes are almost always kept as rentals, and landlords simply do not sell their properties that often. Single-family homes, on the other hand, can be over-occupied or rented out, so you can buy a property that has been a private residence and then use it as a rental. You will have more choice of neighborhood when buying single-family homes, and you'll also be able to be more choosy when selecting a home since there are more options.

Con: The margins tend to be lower.

You will only be getting one rental income from a single-family home, which means you need to be really careful that your mortgage and taxes on the home are significantly lower than the amount you can charge for rent. And even if you get a great deal on a single-family home, your margins are likely to be a bit lower. If your goal is to make the most profit possible and you don't care so much about the other benefits discussed on this list, then you may be better off buying mutli-family homes.

Pro: Your renters will probably stay longer.

The nicest thing about single-family homes is that once you find a good renter, they typically stay for a while. People who rent single-family homes are usually couples or couples with kids, which means their lives are more stable and they are less likely to move around every year. You won't have to go through the tenant search process as often, which is nice since finding tenants is so time consuming.

Con: You'll have more outdoor property to manage and care for.

If you buy two single-family homes as rentals, you will have twice as much exterior space and landscaping to care for as if you were to buy one duplex. Make sure you account for the extra time and cost involved with this maintenance when deciding whether single-family rentals are right for you.

Whether you decide to start searching for single-family real estate or the more typical multi-family homes, as long as you have a good real estate agent your experience should be an exciting one.