Investing in Single Family Houses

Like any other form of investment, real estate has its fair share of market cycles, but of late, it has been getting bad publicity. Investors are now having second thoughts about investing their money in real estate, what with all the misconceptions about the housing bubble bursting, unsold homes and condominiums, the increasing number of foreclosures and the declining property values.

But, there’s still big money to be made in real estate, be it in good or bad economic times. Everybody needs to live somewhere, shop somewhere and work somewhere and there has to be someone who will provide them with that space. For real estate investors, who are looking for a long-term investment, owning any kind of real estate means financial freedom.

Why Invest in Single-Family Homes?

Now that you know the value of investing in real estate, here are a few reasons why it is a good idea to invest in single-family homes. But, why invest in single-family homes and not in apartment buildings, office buildings, shopping centers or raw land? Nothing is really wrong with these types of real estates, but single-family homes have several advantages over these, including:

· Less money needed – The average person just does not have the kind of funds to go out and buy an apartment building or shopping center. However, it is possible to go ahead and buy a single-family home with 10% or even less in down payments. In this way, you can now buy a $ 100,000 home for only $10,000 down payment. Single family homes are brilliant for the average real estate investor, as it is quite feasible for the average investor to save $10,000 to buy a property.

· Flexibility – For instance, let’s say you could buy 1 apartment building or 5 houses with the same amount of money. When you need money, with the apartment building you would have to sell the whole thing, bring in a partner or refinance the whole thing. With the houses, you might have to sell one, bring in a partner for one or refinance just one. Apartment buildings are harder to sell. Houses, on the other hand, are far easier to sell. However, the demand for single-family homes has increased and so they can be sold very quickly.

· Higher Equity build up – Generally, there will be more appreciation in single-family homes than in other types of real estate like apartments and houses. The value of apartment buildings is usually based on how much money they can bring in or the income approach. On the other hand, the value of single-family homes is based on comparable sales.

· Less chance of rent control – Rent control is when the government informs you about how much to charge as rent. In big cities that have rent control, many buildings have been abandoned, as the owners were not able to charge sufficient rent to cover their costs. For a property owner, rent control comes as a menace. Fortunately, for the single-family home investor, the rent control laws in most cities only apply to buildings that have 4 or more units.

· Less risk – Single-family homes don’t give you the opportunity to keep all your eggs in one basket. These homes are generally scattered all over the area. Single-family homes attract a much better class of tenants than most apartment buildings. They tend to attract families with school going children, who are generally permanent residents, whereas, apartment buildings attract single people who are more open to moving in and out. In addition, people who live in apartments are less likely to take on repairs and maintenance and look after your property.

Happy Investing!
Mary Wozny