Continuing from previous posts in our single-family rental introductory series, we want to highlight the benefits of investing in single-family rental properties.
- Single-Family Rentals: An Introduction
- Single-Family Rentals: Primary Drivers of the SFR Market
- Single-Family Rentals: Top Markets & Movers
Single-family rental (SFR) properties have several attractive characteristics that investors are drawn to. Here’s a brief overview of the most significant advantages for investors to consider:
- Steady cash flow generation: With leases in place, cash flow can be calculated, and as rental demand increases in a particular market, rising market rents can be predicted.
- Appreciation potential: Home values tend to appreciate over time. Over the last five years, home values have increased 23% (some markets are up over 50%) and low-to-mid single digit appreciation is expected annually for the next several years in many major markets.
- Diversification: Returns from SFR investments are not correlated to the stock market and provide an opportunity to diversify investments across assets and regional markets.
- Low volatility: Private real estate has been one of the lowest volatility investments over the last 20 years (while delivering some of the highest yields).
- Leverage: In many cases, financing is available for SFR investments, which allows for further diversification of assets and increases overall returns. This differentiates investing in real estate vs. investing in stocks; investors often aren’t able to use debt to invest in the stock market.
- Diversified exit strategies: Broader exit options vs. other real estate asset classes with the option to (a) sell to homeowners or (b) sell to another investor offer greater options for liquidity.
- Material tax benefits: Owning SFR investments qualifies owners for numerous tax benefits including operating expense deductions, interest expense deductions and accelerated depreciation. Roofstock encourages all investors to consult a tax professional before making investments.
Single-Family Rental properties allow you to diversify your real estate holdings and invest in cash flowing assets across geographic markets that offer a variety of advantages over other investment assets.