Single-family properties have often been a good real estate investment option, whether you're new to the rental industry or not. From the weight of your property management duties to profitability, it can be a good addition to your real estate portfolio. Right now, however, it is an even better opportunity than ever.
Key Highlights:
- Single-family homes are becoming an increasingly valuable investment opportunity in Atlanta due to high rental demand, limited supply, and rising rent prices compared to multifamily units.
- High mortgage rates are discouraging investors from purchasing detached single-family properties, but strategies like larger down payments, buying distressed homes, or joining fractional ownership can help overcome this challenge.
- Single-family rentals offer strong, long-term tenant demand, especially from families and retirees, resulting in lower turnover, fewer vacancies, and steadier cash flow.
- These properties are easier to manage and maintain, appreciate well over time, and often come with better financing options and tax benefits for investors.
- Success in single-family rentals relies on effective management practices, including strong marketing, thorough tenant screening, consistent rent collection, proper maintenance, and accurate accounting.
Why Atlanta is a Prime Location for Single-Family Rentals
Rent prices for single-family homes in Atlanta are soaring, with costs reaching 20% higher than multi-family apartment building units, according to Zillow. More multifamily units are entering the rental market, leaving single-family homes in low supply and strong demand.
However, there is a catch. If you're wondering why there aren't a lot of single-family homes in the rental market right now, it's because of the high mortgage interest rates deterring buyers from investing in detached single-family homes. So, what can you do?
- You can increase your down payment. If you have the means to finance a large portion of your investment, it can help you offset high mortgage rates. This is perfect for people who already have several rental properties in their investment portfolio and are taking bigger risks.
- Look for distressed properties. Assess the reason behind the sale, and determine whether it can be saved so you can turn it into a rental. Financial distress typically means the property is in good condition, but the owner cannot pay the mortgage anymore. Sales due to physical distress might be trickier, since you'll have to account for repair and renovation costs.
- Participate in fractional ownership. You can find other real estate investors to share the cost of a home. By pooling capital, you won't miss out on the advantages of certain investment opportunities. While the income will be divided between property owners, you can invest in more properties once you save enough.
Why Single-Family Homes are Great Investment Opportunities
Strong and Stable Demand
Single-family homes continue to see high numbers in rental demand, since there are always tenants with new family members who need a bigger space. You can even expect high demand if your property is in a desirable area. With the target market being long-term renters, such as retirees and families, there are lower tenant turnover rates and fewer vacancies, leading to a steadier cash flow.
Easier to Maintain and Manage
With a smaller square footage and fewer tenants to oversee, single-family homes are easier to maintain, helping you retain property value. Since single-family rentals are also meant for long-term residence, most tenants are more inclined to take care of the property and follow lease rules, especially with the shortage of supply.
Higher Appreciation Potential
Single-family rentals are a great real estate investment because of their potential for property value appreciation. The property type often appeals to both homebuyers and investors, and the more potential buyers you have, the higher the price you can sell it for. Long-term appreciation is one of the biggest reasons to invest in single-family rentals, as it also provides you with multiple exit strategies.
Better Financing and Lower Entry Costs
Lenders are more lenient with single-family homes and offer more favorable mortgage terms. That, paired with lower purchase prices, makes it the perfect property type to enter the rental market with. Be sure to watch for factors like market trends and mortgage rates so you can create a suitable investment strategy.
Better Tax Benefits
The Internal Revenue Service allows investment property owners to deduct several expenses connected to the rental, such as ordinary and necessary expenses, improvements, and depreciation. Expenses like insurance, mortgage interest, maintenance, and physical wear and tear all fall under those categories.
How To Make Sure Your Rental Property Succeeds
Property investors need to work towards positive cash flow, which means they need to maximize their rental income by managing their rental property the right way. Some of the important things you need to do include:
- Marketing: A high rental demand is not enough to find renters. You need to market your rental property to reach your target market and increase visibility.
- Tenant Screening: Getting bad tenants is one of the worst things that can happen to your business. They might fail to pay rent on time or at all, cause property damage, or just be generally difficult to deal with. These can all impact the profitability of your rental real estate.
- Rent Collection: Make sure your tenants pay on time to ensure that your investment property's cash flow remains positive. Enforce lease rules when needed so tenants won't be encouraged to pay rent late.
- Maintenance: Maintenance is what keeps your property in good condition. Neglecting it by delaying repairs or failing to conduct regular inspections is a quick way to lose money, as you will have to face high repair costs. Your tenants will also be unhappy, which can lead to turnover.
- Accounting: Managing the expenses and income of your rental real estate is just as crucial, since the numbers can tell you whether your property is underperforming or not, allowing you to take the necessary actions.
Single-Family Real Estate Investment FAQs
Why are single-family homes in Atlanta in such high demand?
- Demand is strong due to limited supply, growing family-oriented renter populations, and rent prices that continue to rise faster than those of multifamily units. This makes Atlanta a great market to enter for single-family homes.
How can investors deal with today’s high mortgage rates?
- Investors can increase their down payment, look for distressed properties, or participate in fractional ownership to reduce upfront costs and improve affordability.
What makes single-family homes easier to manage than multifamily properties?
- They have fewer tenants, smaller square footage, and typically attract long-term renters who take better care of the property, reducing management workload.
Do single-family rentals appreciate more than other property types?
- Yes. Single-family homes often appeal to both investors and homebuyers, increasing buyer demand and contributing to stronger long-term appreciation.
Are financing options better for single-family homes?
- Generally, yes. Lenders tend to offer more favorable mortgage terms and lower entry costs for single-family properties compared to multifamily investments.
The Road to True Financial Freedom
Expanding your rental portfolio is difficult when you have your hands full with landlord duties. You won't be able to conduct proper research to determine which investment would benefit you most.
That's where we come in. With a property manager keeping an eye on your investment property, there's no need to spread yourself thin. PMI Georgia has the resources and expertise to let you earn passive income by taking on your duties.
Call us, and let's make it happen.
