Whether you consider yourself a seasoned real estate investor or are still debating if the life of a landlord is one you want to pursue, investing in single-family homes may offer a number of financial benefits over multifamily properties.
Here’s a look at some of the advantages with investing in a single family rental property.
Long-term passive income stream.
If you’re able to secure a single-family property in a high-demand area, you may be able to find tenants who are willing to pay a premium for the ability to live in a private setting that doesn’t require shared walls, common parking or community green space. If your lease terms require that tenants commit to occupancy of one year or longer, your single-family property could become a consistent form of passive income that boosts your long-term monthly cash flow — all while simultaneously helping you build equity in a single-family property that you own.
Possible tax advantages.
When you own a rental property for the purpose of generating rental income, the Internal Revenue Service (IRS) requires that you report the income on your annual tax return. Despite that, investing in single-family homes may provide you with the opportunity to deduct several direct and indirect expenses associated with it. In addition to the potential to write off expenses related to the property’s utilities, financing, maintenance, property tax and insurance, you may have an opportunity to claim depreciation on the property itself for several years.
Learn more about rental real estate income and deductions on the IRS website, here.
More control over costs.
By definition, a multifamily property involves more than one tenant, and more than one unit — both of these factors can increase the complexity associated with being a landlord. Not only might a multifamily property mean you have to carry multiple insurance policies to cover the shared external aspects of the property (such as the roof), you may be required to carry and pay for separate policies that cover the valuables inside each unit. In addition, multiple tenants and units can increase the scope and costs of maintenance and property management demands, from lawn care to utilities to trash collection.
More flexibility over lease terms.
When you invest in a single-family property, you may have more control over how much money and time you spend on each property, based on what you invested into it and what you want to generate from it on a monthly basis. Single-family properties allow you to customize the terms of each lease based on the dynamics of the rental market, the neighborhood, and the demand for the property at any given time. If you struggle to rent a single-family property within a certain time frame, for example, you can consider if you’d like to adjust the lease terms temporarily to attract tenants by allowing pets or paying for some utilities. With a multifamily property, you may not be able to significantly adjust the terms of a lease without impacting the other lease agreements for tenants who live in the same building.
Ready to start your journey into buy rehab and rent single-family home investing in Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, or Pennsylvania? Contact Asset Based Lending to learn more about hard money financing options today.