All real estate investment property separate into one of five categories. We want to continue our discussion on the advantage and disadvantage each category presents hoping that it might be helpful to the real estate investor and others seeking to learn about real estate investment property.
Drawing from the list of categories illustrated below, this time we want to look at number two on the list, single-family homes.
- Land speculation
- Single-family homes
- Multifamily properties
- Commercial and industrial properties
- Retail shops and shopping centers
Single-Family Homes
Many real estate investors swear by this kind of property for real estate investing. Generally, to buy, fix up, and sell; to buy, maybe fix up, and rent; to buy, live in, slowly improve, and then sell.
The key with buying single-family homes as a real estate investment, of course, is to cover the carrying cost. Once the investor knows that there will be no cost to hold onto the property, time generally will ensure appreciation of value and an ultimate profit.
If the home has the flexibility of a future economic conversion to some other use, then that can be an added bonus to what may already be a good real estate investment. All of which depends on the investor’s due diligence having been carefully accomplished to ensure that the area is not in a decline and that there are no pending public or private works that can adversely affect the property in any way.
Advantages of Single-Family Home Investments
The biggest advantage to buying single-family homes is the fact that single-family sellers are often the most motivated of all sellers. For many different reasons (job transfer, desire for a smaller or larger home, personal or financial reasons) people need to sell a home.
When a real estate investor is able to find a truly motivated seller who is telling the truth and not hiding something like termites or a structural failure, the downside risk can be slight when investing in single-family homes.
Disadvantages of Single-Family Home Investments
The potential profit may not be very great if the investor is looking for quick growth. If the investor wants to build an income stream by buying and then renting out the homes, the investor will discover quickly that the property maintenance problems that come with owning several single-family homes may not warrant the purchase of this kind of rental property.
