Most people dream of becoming financially free … and most people aren’t exactly sure what path to take to get there. If you’ve got cash to invest, where should you put it? Should you start a small business, buy stocks, or invest it in real estate? What about purchasing SFRs?
Many experts agree that it should be the latter – and they point to single-family residential homes (SFRs) as a way to get the most for your investment dollar.
Purchasing SFRs — What You Need to Know
Better Financial Leverage and Diversification
Unlike many other types of investments, purchasing SFRs allows you to maximize far beyond the dollar amount you have to spend. If you have $250,000 and use it to purchase stocks, for example, you can only purchase up to $250,000 across any given stocks.
By using that money to finance SFRs, however, you can invest in a value that’s far greater than the $250,000 you put down. Even better – you can spread that money out to make down payments on several different homes, diversifying your investments across properties and even various areas. This will help insulate your investment should property values drop in a specific area.
Make Passive Income
Regardless of real estate market ebbs and flows, a SFR will increase in value over time. This will happen due to supply and demand, fiscal inflation, drops in home interest rates, as well as factors in any given area that suddenly make it more attractive (such as the development of new shopping, offices, or infrastructure projects that increase the quality of living for residents in the area). The long game in real estate investing is, of course, to take advantage of these increases to make money on a sale.
One of the best things about purchasing SFRs as an investment strategy is the potential to make passive income in the meantime. In fact, people who purchase turnkey SFRs are ready to generate cash flow from day one; some turnkey properties even come with renters already in place. As these properties increase in value over time, they are able to fetch an even higher rental rate.
Renting out an investment home may sound like anything but a passive investment to someone who isn’t excited about becoming a full-time landlord. Hiring the right property management company will ensure that you can fully focus on your full-time job (or retirement, when you reach that point) as your SFR investments generate cash flow month after month.
Higher Rental Income
While passive income is rewarding, passive income from SRFs is particularly so. This is because SFRs tend to command a higher rental rate than multi-family properties. This may vary depending on size and location, but many SFRs have more square footage, more bedrooms, and more bathrooms than an average rental in a multi-family building.
In addition to the extra space, tenants are willing to pay higher rent for the extra amenities that come with a house. Items such as a garage, a porch, and a fenced yard come at a premium when it comes to rent prices.
Get Tax Deductions
Another reason many investors choose purchasing SFRs as a strategy is the ability to take advantage of helpful tax breaks. Owners of pass-through businesses (including rental businesses structured as LLCs) are able to deduct 20 percent of their business’s income. This is particularly helpful for investors looking to build long-term wealth and become financially free.
Work with a Turnkey Investment Company
Investing in SFRs requires choosing a property that will see a good rate of appreciation over time and generate enough passive income to cover expenses and even turn a profit. This is why it's helpful to work with a knowledgeable turnkey investment company, especially if you're investing in an area where you're not incredibly familiar with the real estate market and trends. The can help you get on the path to successful SFR investing … and on the road to financial freedom.
