Posted on: 18 November 2020Share
More and more, real estate investors are looking to buy single-family homes as rentals, rather than investing only in multi-family properties. This opens up the option of renting to a different demographic of renters who really want land and a garage with their rented space. When you rent out single-family homes, there also tends to be less turnover in renters, which means you spend less time and resources looking for tenants. However, if you want this endeavor to go well, there are a few mistakes you will want to avoid as you shop for single-family homes to use as rental units.
Mistake: Buying homes that are too large
The larger the home, the more you are going to have to charge for rent. While there may be a few renters out there who are willing to pay a higher price for a larger home, most people renting single-family homes are doing so because they can't afford to buy. So, you will have an easier time renting out a smaller home at a lower monthly rate. You'll have a harder time finding tenants and getting your worth with homes over, say, 2,000 square feet.
Mistake: Failing to distinguish between outdated homes and those in disrepair
When you are going to rent out a home, you do so with the understanding that the renters won't take care of the place as well as you would. As such, it's okay to buy homes that are a bit outdated, and then just update them after a few years of having renters in there. What you do not want to do, however, is mistake a home in disrepair for one that's just outdated. For example, olive green tile that has been out of fashion for decades is fine. Tile with crumbling grout and entire missing pieces is not. You don't want to have to be called in to repair a home every month once you have a renter in there, so buy something in good condition, even if it looks dated.
Mistake: Not paying enough attention to the roof and HVAC systems
Two of the most cumbersome parts of a home to replace are the roof and the HVAC system. If you're living in a home, coordinating this work is not to bad. But if you have renters in there, arranging for an HVAC company to come in on their schedule or a roofing company to work without disturbing anyone can be a major nuisance. Avoid buying a home with an aged roof or HVAC system unless you plan on fixing the issues before you begin renting it out.
Single-family homes can make good, profitable rentals, but you do need to be careful what you buy.