I have advocated for investment in single family residences (SFR) for years. And for many reasons. When classifying SFR, I also include townhomes in the mix since they can be treated similarly.
Some of the reasons are:
- They appreciate stronger than multi-family since values are based on demand and not an income approach used in most multi-family.
- The can be sold to an owner occupant, and there are endless buyers for homes.
- They are MUCH more liquid than multi-family. The sale process and is typically 30-45 days rather than 3-6+ months in multi-family.
- Tenants tend to stay much longer. Our average SFR tenancy is 3 years, compared to 12 months in multi-family.
- Due to longer tenancy, turn-over and vacancy costs are much less.
- ROI can be stronger with SFR due to reasons listed above.
- They are a more passive investment. Less drama, less headaches. Anytime there are common areas and shared walls, we see drama and operational challenges.
But now, due to COVID-19, we are going to be seeing so much opportunity with SFR investing. We are seeing people moving by the droves from the cities and smaller apartments into suburban homes where their costs are less, and the space is more. As more and more people keep working from home, I believe we will continue to see the SFR demand increase, and the apartment demand decrease.
Additionally, class A apartments are being hit in many areas around the country as incomes are reduced and people are seeing budgets constrained. I have seen investors such as Grant Cardone, who holds a lot of class A assets, literally giving away his rental units in order to keep them filled. His tenants have downgraded to class B, C, or even SFR type rentals.
If you find this helpful, please share!
~ Nate
