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Single Family Rental Investment Leads to High Return on Investment

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Lawrenceville, GA, September 29, 2021— Across the nation, housing markets are booming. In the past year, between April 2020 and April 2021, the median home listing rocketed 17.2% as buyers outnumbered available homes. Listings have become a battleground for fast-paced bidding, with potential buyers offering as much as $60,000 above a home’s initial asking price.

Many people have expressed confusion over the current state of the housing market. How come no one saw it coming?

Well, we did. There’s been a housing shortage for years, but it didn’t receive much attention. In fact, the United States built 276,000 fewer homes per year between 2000 and 2020 compared to between 1968 and 2000. In addition, prices have also been driven up by a scarcity of lumber due to increased home renovation projects during the COVID-19 pandemic.

Because it is so difficult for people to buy a home right now, many have turned to renting single-family homes.

All of this means that, while it may seem contradictory at first, now is a great time for single-family home investors to shine by breaking the mold of “old school” real estate.

Investing in 2021’s Housing Market

Terry Painter, author of “The Encyclopedia of Commercial Real Estate Advice,” states that a good goal for any real estate investor is to aim for is a 20% return on investment (ROI) by a property’s 5th commercial year. The ROI doesn’t have to be limited to any one source and can be split between operations and rental increases and appreciation or depreciation of the property.

While it may feel contradictory, now isn’t a bad time to invest in a single-family rather than a multi-family property. Coming out ahead may be difficult, but it’s not impossible. The most important factor to account for is location. Between June 2020 and June 2021, 5 major renters markets saw a rent increase and 5 others saw a rent decrease. Landlords can successfully invest in a single-family home, but they need to do their homework beforehand.

Real estate investor, Justin Pierce, describes some of the advantages to investing in single-family homes, including:

  • A lower purchase price — It’s much less expensive to buy a traditional house than a multi-family property.
  • Simpler management — The resources required to maintain an apartment complex are more significant than those needed to maintain three single-family houses. These resources can include everyday things like time, money, and workers.
  • Ease of Financing — Financing options are easier to find for a house. It is possible to finance an apartment building but finding an acceptable finance option can be difficult.
  • Plenty of buyers — Should the time come when an investor is ready to sell a property, there will be more buyers for a single-family property than an apartment complex.
  • Safer investment — Investors can slowly expand their portfolio when focusing on single-family homes because less risk is involved.

Another critical factor for investors to keep in mind is insurance. Just like any other asset, properties should be protected, and one form of protection is insurance.

Lee LeBaigue, Senior Vice President of Atlanta based https://propertyinsurancehq.com/ says,

As of right now, insurance technology (insurtech) can’t quite figure out how to give multiple insurance rates from different carriers for landlords. This means an independent agent is necessary to get the best rate and coverage. An agent that specializes in investment property, whether it be short term rentals, single family homes, or apartment buildings is key.

Another way that investors are working smarter is PropTech.

PropTech

The real estate industry as we know it is being revolutionized. New terms like “old school” and “new school” are starting to pop up more often as new technology edges its way into the field. The broad term for new property and real estate focused technology is PropTech.

Vincent Lecamus defines PropTech as “A collective term used to define startups offering technologically innovative products or new business models for the real estate markets.”

The ultimate key to investing in single-family homes in 2021 is PropTech. It has created an entirely new industry and forever changed the way real estate works.

Some examples of PropTech capabilities include:

  • Manage all properties in a portfolio with one platform
  • Research neighborhoods and communities to make smarter investments
  • Find underpriced properties and buy under market value (the number one rule of investing)
  • Automate tenant paperwork, payments, and notifications
  • Track a property’s performance using data like age, economic and financial value, and location
  • AI prediction of a property’s market price and rent

While PropTech has done a lot for real estate, investors need to be smart about what PropTech they use. Not every system is made equally, and some platforms are optimized or designed for specific geographic areas. Investors should shop for technologies applicable to their area or the area they want to expand into.

Common Worries and Concerns

Real estate investing is not a risk-free venture, but there are ways you can minimize the risks.

The biggest concern currently weighing on the minds of small landlords is the nationwide rent moratorium declared by the Centers for Disease Control and Prevention (CDC). The ban was recently extended through October 3 of 2021, and almost all landlords are being affected. Large groups of investors who can’t keep their properties afloat have begun selling them off to more stable investors or families looking to buy rather than rent.

If people looking to invest in single-family homes aren’t in a position to take on the risk of running a property during the rent moratorium, then this is the time for them to do their homework. Right now, it’s all about timing. Investors should be looking for locations with high demand and preparing for when the moratorium lifts.

Another common worry is problem tenants who don’t pay rent on time or cause problems for your property or their neighbors. However, there are ways to minimize the chances of housing a problem tenant. Landlords are allowed to have a tenant screening process and can require the following from a potential tenant:

  • Credit check
  • Criminal background check
  • History of previous landlords
  • Work history

All of these provide evidence of a tenant’s quality and give landlords peace of mind when looking for new renters.

High vacancy rates can also pose a problem to small investors and landlords. For those that only have two properties with one sitting empty most of the time, then half of their potential income is nonexistent. Vacancy rates are more difficult to control than problem tenants, but they can still be reduced by:

  • Renting out homes in high-demand areas
  • Keeping rent comparable to other similar properties in the area
  • Advertising the property on platforms such as social media and housing sites
  • Beginning advertising as soon as the current tenant declares they are moving

The biggest takeaway for investing in single family homes in 2021 is this — easy management is key. Managing multiple single family home properties can be painful, especially when it comes to insurance. Many carriers won’t take an LLC or other incorporated business and some even require your liability extend from your primary home insurance. Savvy investors look for programs that are month to month and have the flexibility to add and remove properties at any time. For more information on landlord and rental insurance check out https://propertyinsurancehq.com.

About Property Insurance HQ: Property Insurance HQ is owned by InsuranceHub Leavitt Agency. We are a team of independent insurance agents and property investors dedicated to making the insurance process easy. Our goal is to offer practical advice and solve common problems that property investors face every day. By blending the best of technology, strong insurance carrier relationships, and best in class insurance programs we aim to change how property investors do business. Bridging the gap between PropTech and InsurTech is our sweet spot. We enable our insurance agent experts by giving them best-in-class communication tools. Our API integrations and efficient workflows allow us to quickly assess, quote, and bind investment property from all over the United States.

Contact Info:

Lee Lebaigue
Property Insurance HQ
1720 Lakes Pkwy, Lawrenceville, GA 30043
(770)497-1200

Property Insurance HQ

Originally Posted On: https://syndication.cloud/single-family-rental-investment-leads-to-high-return-on-investment/

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