The case for single-family rental homes
If you're like most people, you probably think that the wealthy got to where they are by investing in stocks, picking the right tech companies, or getting lucky with a new business venture.
But if you take a closer look at the wealthiest people in the world—or even just the people around you—you'll notice that most of them have something else in common: a massive portfolio of real estate investments. And of those investments, an increasing number are single-family homes that they've turned into rentals (SFRs).
So why should you invest in SFRs?
Let's take a closer look.
The Financial Benefits of SFRs
They are high in demand
Over time, SFRs appreciate at a higher rate than inflation and the stock market. This appreciation is due in part to the limited supply of land as the world's population continues to grow, and the cost of living increases in major cities. The demand for housing will always exceed the supply, which means that SFRs are a safe investment that will only become more valuable over time.
They are less risky
SFRs can also offer higher returns than other types of investments like stocks or bonds. They're much less volatile, which means your investment is less likely to lose value during market corrections or downturns. And if you choose to leverage your investment with financing, you can potentially earn even higher returns.
SHARE further de-risks the investment for you by the time you own the asset. Our SFRs come fully managed and renovated. Costs that affect your ROI have already been factored into your estimated closing costs.
Consistent cash flow
Another financial benefit of SFRs is that they offer consistent income. Unlike stocks and bonds, which can fluctuate based on economic forces, rental payments usually stay relatively stable since they're based on a fixed lease agreement. For example, when interest rates rise, the stock market typically decreases in value – but this doesn’t have a direct impact on SFRs. This predictability can make it easier to manage your cash flow and plan for long-term expenses.
Best of all, SHARE has a rental guarantee for your first 12 months of ownership. We ensure our property listings are tenanted so you start collecting rent from day 1.
Low capital requirements
Surprising but true. A key advantage of investing in SFRs is that your capital requirements are relatively low because of the funding options available.
For example, you can often refinance the property to get a new mortgage with a higher loan-to-value ratio, which lets you leverage your investment. Additionally, there are often private lenders who are willing to provide funding for these types of investments with a relatively low amount of capital.
A different market
SHARE provides access to anyone who wants to start building their real estate portfolio. The properties we sell are located in American suburbs with solid neighborhood ratings, averaging $300,000 USD for a single-family detached home in those regions.
A tangible asset
SFRs are physical assets that cannot be devalued by inflation. Historically, real estate usually increases in value as inflation goes up. This makes real estate perfect for wealth preservation during periods of high inflation. At the end of the day, you’re owning land and land is scarce. With population growth and high migration forecast trends, SFRs are and will become an even hotter in-demand commodity.
… that’s not to say investing in SFRs is simple. In fact, as with any sort of investment, there are risks and complexities in navigating the space.
Typically, SFRs are harder to stabilize because they’re a very high-effort process. You have to find the right property, with the right price point, fix up the property as needed, find a tenant, and maintain it. In summary, some drawbacks to consider:
They require constant upkeep
Owning a home requires maintenance. Owning a home someone else lives in may require even more work. It could be a leaky faucet, could be a faulty AC. This could be a massive headache to manage if you a) don’t live in the same city as your asset and b) don’t have a reliable property manager to lean on. Hiring a property manager could get very pricey and you don’t always know if they’re the right fit. They cost ~10% of your monthly rent to manage.
The benefit of SHARE properties is that we have already factored in the cost to your ROI calculations on our platform. Not only that, a dedicated property management company is already assigned to your home. With SHARE, you can be a landlord without the hassle.
You’re only cash-flowing if your property is rented out. Similar to the above, this is hard to manage by yourself remotely. SHARE has a rental guarantee of 12 months, ensuring that by the time you own the property, it is tenanted for the first 12 months.
The wrong neighborhood
New markets are unfamiliar territory! How do you know the quality of tenants, the quality of the school district, and what crime rates are? Rest assured. Our investment team at SHARE acquires properties based on a thorough screening of specific criteria, such as neighborhood ranking, price point, rental & equity appreciation, before it is listed.
While there are always risks involved with any type of investment, single-family home rentals are generally safe and offer a multitude of financial benefits that make them an attractive option for many investors.
If you're looking for an investment that will provide consistent income and build long-term wealth, investing in an SFR may be right for you, and SHARE makes this process hassle-free.