A few years ago, Warren buffet said that investing in single family housing was an “attractive” investment. He also added that he would buy thousands of homes if it were practical at that time.
Seeing that he knows a thing or two about investing, we should take a closer look at his idea.
Now in 2017, single family homes (SFHs) remain a good option for your investment needs. If you are not sure what a single family home is, here is a brief explanation.
What to Know When Investing in Single Family Housing
There are different types of residential buildings:
This is a detached private home where one family lives. It can have a front and back yard, and a picket fence.
- Multi-family home
This is a home subdivided into up to four units. If it has two units, it’s called a duplex.
These are row houses with multiple floors and shared common walls. They have restrictions and joint maintenance agreements.
These are small residential units in a large building.
With these differences in mind, you have to ask yourself, “Why should you be investing in single family housing?” There are several reasons:
- They are easier to maintain than townhouses and multi-family homes
- They offer a lot of privacy
- They are more affordable
- They are easier to sell because they attract a diverse range of buyers.
- If you are using the SFH for rental purposes, you will deal with one tenant. Managing many tenants can be difficult because some of them pose various problems. For example, failure to pay rent on time or destruction of property.
Things to Consider Before Investing in Single Family Housing
1. Purpose of the property
You need to answer the question about why you are investing in single family housing. Is it going to be your family’s home? Are you planning to resell it? Do you want to make it a rental?
Answering these questions will help you determine your approach to investing. For example, if you want the property to be a rental, you can hire property managers to look after the home. They will also manage the tenant on your behalf.
Like businesses, location plays a key role in real estate. Whether it’s a personal home or a rental, you’ll want to look for property in good neighborhoods with access to shopping facilities, eateries and public transportation.
The location also affects:
- the rate of appreciation of your new property
- the cost of the single family house
- the amount of rent you can charge
- the selling price of the property
As you can see, the location will have a direct impact on your investment returns.
Even though investing in single family housing is cheaper than larger residential properties, you still need to check your financial status. If you can buy the property outright, that’s good. If not, look at the mortgage options available.
Other financial responsibilities in owning the home include renovation costs, maintenance fees, home insurance premiums, and property taxes.
If you’re renting out the property, you’ll need to pay professionals to fix problems that arise.
There are a lot of factors to consider.
Contact us today for assistance.