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Rent It Network

Are Single Family Homes The New Cash Flow King?

Tampa Bay stand-alone house profitability

Investing in rental properties is a great way to build your wealth. When evaluating options and doing research you will see there are two distinct paths to achieve this. The first is the multifamily market consisting of 2+ units.  The second is the single-family market. Both have their advantages and the choice really depends the goals of the investor. Typically, all the research you perform will direct you to multifamily investing to look at straight cashflow… BUT what if I told you the new king for the small to mid-size investor is single family residential (SFR)? Here are a few compelling reasons why… 

  1. Less competition buying – Because you are not the only one trying to buy investment properties and all the internet research tells investors to buy multifamily it has become a saturated market driving the prices out of cashflow territory. What this has ultimately done is drive the 10% COC return to around 3-5% or less. The reason is simple – supply and demand. The internet has driven so many investors to the same thing! Now the single-family market takes a little more hunting skills but there are more deals to be had because there are more single-family homes available. You will need to find areas where the rental demand is high to make sure the numbers work at the purchase price. 
  2. Renters want more space – In a post COVID world where more of the workforce is virtual and school is virtual, locations close to the trendy areas has expanded. Think of it this way… If a renter can pay $2000 for 2 bedroom with 1200 square feet close to downtown or pay $2000 for a 4 bedroom with 2000 square foot 30 minutes outside of town and work from home what do you think they will choose? This is already happening and rental prices are on the rise outside of major areas. Supply and demand is working in the investors favor. 
  3. Forced Appreciation- Maybe its not all about the monthly cashflow. I know this is a big statement but think of it like this. You may not make a ton of money every month but what if the property value goes up 3-5% annually and someone else (the resident) is paying down your debt service during your hold period. Everything in that gap is CASH! Ever heard of internal rate of return? 
  4. Disposition – Lastly the simple fact is that there are more options to sell in the single-family market. Sell to another investor or a home buyer who will live in the home. This is a distinct advantage over multifamily where the price is dictated primarily by how much is being collected in rent.

If you would like to learn more about the single-family investment market contact us here at Rent It Network. We are more than happy to provide you with inside knowledge from our boots on the ground and assist you with growing your real estate investment portfolio. 

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