The real estate market is ever-changing, but one thing that has remained constant is the popularity of single-family rental (SFR) properties. If you’re into real estate, the chances are you’ve considered investing in an SFR property. But what exactly is SFR real estate, and why should you invest in it?
What is SFR in real estate?
SFR is an abbreviation for single-family residences. In real estate, SFRs are homes that are detached from any other dwelling unit, making them stand-alone properties. This type of housing is typically found in suburban or rural areas and is the most common form of housing in the United States.
SFRs can come in a variety of architectures and sizes, but they all have one thing in common: they provide separate living quarters for a single-family. Because SFRs are not attached to any other unit, they offer more privacy than attached units like apartments or townhomes.
And because they’re usually located in less densely populated areas, SFRs often come with larger yards than attached units. If you’re looking for a stand-alone property that offers plenty of space and privacy, an SFR might be the right choice for you.
Benefits of investing in SFR real estate
There are several reasons why you should consider investing in SFR real estate. They include:
- Potential for higher returns
When investing in real estate, you always want to aim for properties that will give you the highest return on your investment (ROI). And SFRs have the potential to do just that.
According to a study by RealtyTrac, an online real estate marketplace, SFRs generate higher rental income and appreciation than other types of investment properties. In fact, the average annual return on investment for SFRs was found to be nearly 11%. That’s higher than the average ROI for all other types of investment property combined!
- The stability of the SFR market
Another reason to invest in SFR real estate is the stability of the market. Unlike some other types of investments, such as stocks or cryptocurrency, which can be volatile, the SFR market has remained relatively stable over the years.
Of course, there will always be ups and downs in any market. For example, after the Covid-19 pandemic hit, there was a brief dip in the SFR market. But as people began to adjust to the new normal and realize the benefits of suburban living, the market quickly recovered.
In other words, investing in SFR real estate is a relatively safe bet that will likely provide you with steady returns over time.
- Tax breaks
Another benefit of investing in SFR real estate is that you may be able to defer taxes through depreciation. Depreciation is an accounting method that allows you to spread the cost of a property over its useful life.
For example, let’s say you purchase an SFR for $200,000. You can depreciate that property over 27.
This means that you can deduct $200,000/27, or $74,07407 per year, from your taxes.
Of course, you’ll need to consult with a tax professional to see if your property is eligible for depreciation and to determine the best way to take advantage of it. But if it is, it’s yet another reason why investing in SFR real estate can be a smart move.
- Easy to manage and finance
One thing that makes SFRs an attractive investment is that they’re easy to manage and finance. Unlike some other types of real estates, such as commercial properties, SFRs are typically easier to get financing for. And once you own an SFR, it’s usually fairly simple to find a tenant and manage the property.
Of course, there’s always the potential for unforeseen repairs or other issues. But overall, SFRs tend to be much less hassle than other types of real estate investments.
SFR real estate vs. multifamily investing: which is better?
The debate of SFR real estate vs. multifamily investing is a long-standing one, with both asset types having their own unique set of benefits and drawbacks. SFR properties tend to appreciate at a faster rate than multifamily units, making them a good choice for investors looking to quickly build equity.
However, they are also more expensive to purchase and manage, and vacancy rates can be higher. Multifamily properties, on the other hand, offer the potential for higher returns through rental income, and they are often easier to finance and manage.
But they can be more difficult to sell, and their value can be more volatile. Ultimately, the best choice for an investor depends on their individual needs and goals.
So, if you’re thinking about investing in real estate, an SFR might be a good option to consider. Just be sure to do your research and consult with a professional before making any decisions about the ideal property type SFR.
Final Word
SFR real estate investing is a great way to make money in the real estate market. There are many reasons why you should invest in SFRs, such as the potential for high returns, the stability of the market, and the ability to defer taxes through depreciation. So if you’re thinking about investing in real estate, an SFR might be a good option to consider. Just be sure to do your research and consult with a professional before making any decisions.
