SINGLE Family Homes OR Multi Family Properties – WHICH IS Best for New Investors?
|Single-Family Homes for Rentals|
Single-family homes used for rental property have distinct advantages over other types of investments.
An investor can borrow 75-80% at fixed interest rates on appreciating assets with definite tax advantages and reasonable control. The financing alone is attractive compared to some investments that require 50% cash and have floating rates at prime plus for one or two years.
Home prices have adjusted 30-40% around the country, mortgage rates are incredibly low and rents have risen in the past two years due to more demand and shorter supply. Indicators like these point to a strong and sustained rental market.
Consider that you bought a $125,000 home for cash that would rent for $1,250 per month. With $15,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. You’d have an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 1.5% and a 10-year Treasury yield at 1.65%.
The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with some of the alternative investments.
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