Investors who buy rental properties and want to see a return within the first six months are the investors who will likely turn their key to a different investment opportunity, like bonds and mutual funds where sales happen fast. Real estate investment is a process and as an investor you need to understand that it takes time to build up your cash flow, while keeping in mind the risks involved (appreciation, cash flow, financing, etc.). So whether you’re new to real estate or a successful mentor, you need to take every step slow and with caution so the risks are limited. You can, and will achieve a steady flow of income from real estate, especially if you invest in single-family homes that are anticipating an annual cash return to be between 5% and 15%. However, you will only see these numbers if you know what you’re doing when investing and how to invest in single-family homes.
Many real estate investors buy just one rental property.
According to WSJ, the supply of rental homes and the demand from renters is higher than ever. Nearly 14.9 million single-family homes were occupied by renters in 2013 and that statistic has increased 31% since 2006, which is also right before the U.S. housing market collapsed (U.S. Census Bureau). In 2005 there were 10 million single-family homes occupied by renters and that number has since increased to 14.9 million in 2013 (U.S. Census American Community Survey). These numbers should easily guide your next investment decision to a single-family home.
However, many real estate investors buy just one rental property, with several millions of the single-family homes occupied there is more opportunity to expand their profits, so why are these investors stuck on just one property?
Well these owners are also the landlord doing all the handy-man work, receiving late night calls of the hot water heater breaking, mowing the yard, fixing the fence, changing the light bulbs and so many other little chores that owners can’t keep up with just one property, let alone think about maintaining another home and doubling the work. Of course you are saving money by not hiring a property manager, however you are also losing out on the potential to grow your investments and better yet, your cash flow.
We suggest you look deeper into the opportunity of hiring a property manger and run the numbers to figure out if you could be paying someone for your time while seeking other investment opportunities. If the numbers don’t work out, then at least try to buy properties near your home residence so you can be available for any problems or instances that could arise and look back at this opportunity in the near future.
Either way you choose to go, property manager or do-it-yourself, remember the tenant and landlord laws of your property. These can help or hurt your cash flow when dealing with difficult tenants. Also keep in mind that in the first ten years of owning your property you will be spending a good amount of money before seeing a great return, according to experts. This is due to the upfront costs, learning the market, turnaround abilities and so many other financial factors to consider. Understanding these costs upfront will help ease your anticipation of a steady cash flow during these first ten years.
Again, the way to really build a steady cash flow is by investing in several single-family homes. There are so many benefits for investing in this type of property. Financing for single-family homes is more likely to be available for investors and the startup costs, such as down payments, will likely cost lower than apartments as well. Unlike apartments, single-family homes have a greater chance of a long-term commitment with families, which can also help maintain a steady cash flow.
So as you look into the profit opportunities in real estate investment and decide which property type to invest in, knowing there is great opportunity in single-family homes. Be sure you know the basics to investing and take things slow in any property decision you make, knowing exactly what to expect and receive as an investor.
