With rising home prices and tight lending conditions, the dream of homeownership is increasingly out of reach for many people. This has fueled strong demand for single-family rental homes – standalone houses that are rented out to individuals or families. As an investor, single-family rentals can be an attractive investment opportunity. You get the benefits of investing in real estate without the hassles and responsibilities that come with managing an apartment building.
Whether you’re thinking of starting with one rental property or building a larger portfolio, this article will help you gain a solid understanding of the single-family rental investment landscape.
What is a Single-Family Rental Home?
A single-family rental (SFR) home is a standalone, separated residential property that an investor rents to an individual, couple, or family. This is in contrast to multi-family properties like apartment buildings, which contain multiple rental units.
SFR homes have emerged as a popular rental housing option for both tenants and real estate investors. For tenants, a single-family rental provides more space and privacy compared to an apartment. Many renters prefer the yard space, additional bedrooms, storage, and the ability to customize certain spaces. Families, in particular, gravitate towards houses overcrowded apartment buildings.
For real estate investors, SFRs represent an enticing opportunity with several key benefits:
Stable Cash Flows
The ongoing rental income generated by SFRs can produce fairly steady and predictable cash flows for investors, which makes financial forecasting and planning easier. As long as the property is continuously rented out, the cash flow remains relatively consistent month-to-month.
Appreciation Potential
Like other real estate investments, SFRs may appreciate great value over the longer term, depending on market conditions. Investors can generate strong returns over decades from rental income and equity gains.
Inflation Hedge
Rental properties are already proven tangible assets that act as a hedge against inflation. Combined with rising rent pricing, these investments tend to keep pace with inflation over time. This helps investors maintain their asset’s purchasing power.
Tax Advantages
Owning investment properties has several tax benefits, which we’ll explore later in this guide. However, the ability to claim deductions helps improve investor returns.
Affordable Entry Point
While not “cheap,” single-family homes provide a more affordable entry point into rental real estate investing than large multi-family properties like apartments, allowing more investors to get started.
In essence, SFRs offer investors a versatile and appealing rental housing investment that meets strong tenant demand while producing passive income. They attract those looking to own tangible, income-producing real estate without taking on the scale and workload of larger multi-family assets.
Maintenance Responsibility Difference Between Single-Family Rentals and Other Rental Apartments
Knowing the difference between single-family rental and multi-family homes is important so investors know what to focus on. When evaluating single-family rentals, one key consideration for investors is the maintenance costs and responsibilities compared to other rental property types like apartments. There are some major differences in ongoing upkeep and repairs that impact cash flows.
Apartment complexes benefit from economies of scale for maintenance. Things like landscaping, parking lot repairs, and exterior paint can be spread across dozens of units in the building. With single-family rentals, the investor bears the full cost since it is a standalone property.
However, apartment investors are still responsible for replacing any equipment or systems that service the entire building, like the roof, boiler heating system, or water heaters. A single roof replacement on a 20-unit apartment building could easily cost over $100,000. With a single-family rental, replacements are smaller in scale—for example, replacing an HVAC unit or remodeling a bathroom.
Apartment managers also coordinate any unit turnover and interior repairs after tenants move out. While the investor pays for these expenses, the work is bundled together through the apartment company for efficiency. With a single-family rental, the investor has to directly handle any make-ready repairs and maintenance between tenants themselves or by hiring various contractors.
That said, single-family rental investors generally have more control over their property than those who rely on a property management company. They can choose when and how to make upgrades or perform maintenance. Apartment owners are limited by building rules and what the community manager decides.
A few other key differences:
- Yard maintenance – With a standalone SFR home, the investor is responsible for regular lawn care, landscaping, and snow removal. These are covered in apartment communities through HOA fees.
- Utilities – The rental agreement varies, but SFR owners may directly pay water, garbage collection, and other utility bills for the property. Many apartments bundle utilities with rent.
- Tenant problems – Issues like excessive noise or unauthorized pets can impact other tenants more significantly in an apartment building than standalone SFR units, but there are still risks.
The scale of maintenance and liability for repairs is lower per unit compared to multi-family assets – but single-family investors don’t benefit from the pooled efficiencies. Contact your trusted rental property management in Montgomery County, PA, and discuss more about single-family rentals and other rental apartments.
Final Words
Single-family rentals represent an appealing opportunity for investors to enter the world of rental real estate. These properties offer greater privacy and space compared to other apartments since they meet strong tenant demand, especially among families. For investors, they provide predictable cash flow from consistent rents along with long-term appreciation potential.
New single-family rental investors need to understand how crucial hands-on maintenance and repair expectations of standalone housing units can affect the profitability of their investment. While costs are lower per property, landlords also take on more direct responsibility for upkeep compared to multi-family buildings with shared systems. Carefully evaluate prospective houses, along with budgeting for ongoing expenses.
If you have the desire and temperament for more DIY property management, single-family rentals can be a great way to start building a rental portfolio. They provide attractive unit-level economics without requiring the large capital needed for commercial apartments or student housing. Just be strategic in your market, financial planning, and self-management capabilities.
Our super author here at Famous Parenting and an absolute wealth of knowledge. She has studied many topics including creative writing, psychology and journalism but her real passion lies in raising her 3 children. Between working from home, homeschooling her youngest 2 children and navigating the world of teenagers she is a guru for parents.
