Between higher interest rates, stubbornly high property prices, and a competitive real estate market, you may wonder if investing in real estate is worth it anymore. And while the challenges facing the market (and investors) demand we pivot our strategies, none negate the benefits of investing in single-family rentals.
Whether you’re feeling disillusioned or considering investing for the first time, we can all stand to be reminded of why we’re doing this.
Don't Worry, SFR Investing Is Still Worth Your While. Why?
Because SFRs provide steady cash flow
Single-family rental properties provide a consistent income stream through monthly rent. This cash flow typically helps cover mortgage payments and property maintenance costs while generating passive income. Cash flow alone may not be anything grand initially, but the more properties you own and the more mortgages you pay off, the more momentum in your passive income.
Because SFRs are a tangible asset
Real estate tends to hold its value over time. It’s a real, physical, tangible asset. It’s unlike other investments without actual value, like crypto or stocks. No matter what happens, real estate will always be worth something. Unlike other investment options, such as stocks or bonds, you have direct control over the property and can make improvements to increase its value. Owners are not at the mercy of the market and have direct input in investment performance.
Because of the appreciation potential
Historically, real estate has shown appreciation over time. While market conditions may vary, owning single-family rental properties in desirable locations often results in appreciation, allowing you to build equity. Appreciation grows your net worth and increases your profit should you sell the property in the future.
Because it's an opportunity to diversify
Diversification is critical to effective risk management. Each property you acquire diversifies your streams of income. If one property experiences vacancy, the other properties you own will continue to generate cash flow. When those properties are spread out across multiple markets, you better mitigate risks – especially those that come from the state of the local economy and environmental hazards.
Because of the tax benefits
The tax advantages in real estate investment are a big draw. These benefits include deductions for mortgage interest, property taxes, insurance, repairs, and depreciation. That’s not to mention tax-effective strategies like the 1031 Exchange, which is utterly unique to real estate. Consult with a tax professional to understand the full scope of real estate tax advantages and deferrals.
Because this type of investing gives you control and flexibility
The owner of an investment property is in a wholly unique situation. Other investments offer little or no control to average shareholders. If you own stock in a company, it’s unlikely you can tell that company how to run the business. You’re at the mercy of someone else’s decision-making, the good, the bad, and the downright disastrous.
The owner of an investment property has the final say in decisions about that property. You’re not at anyone’s mercy. It’s your decisions and choices that guide and define success. That level of control is rare in the investment world, but it allows you to build a portfolio truly tailored to your goals and risk tolerance.
Because real estate offers a hedge against inflation
As the value of the dollar decreases, and goods cost more, real estate retains its value. Often, its value actually grows at a higher rate than inflation. This means inflation won’t eat away at your wealth as it will in a savings account or in stocks.
Because it provides a foundation for long-term wealth
Single-family rental properties are used as vehicles for generational wealth creation. Over time, as the property appreciates, your mortgage is paid down, and you build equity, you can accumulate wealth and achieve financial independence. This strategy has empowered countless investors to lead the lives they want to live.
Together, these advantages make a pretty compelling case for investing in SFRs. Each benefit on its own may not compare to other investment strategies, but together they make one of the best investments out there.
Investing in real estate isn’t without its challenges. Any investment comes with risks! Due diligence is essential to success. We must constantly evaluate risk exposure, crunch the numbers, and generate momentum for portfolio growth. Don’t be content to stay where you are. Keep going.
Ask us why we specialize in renovating and maintaining SFRs for our investors.