Between REITs and crowdfunding, there are more ways to earn passive income from real estate than ever. So many of these avenues promise lucrative results for little effort on the investor’s part. Why, then, should real estate investors consider single-family rentals instead? After all, don’t they demand more of your time, money, and attention?

Can’t you get the same results with less effort?

Here’s why investors would do well to pursue SFR investing anyway!

5 Reasons SFRs Eclipse Other Passive Real Estate Investments

Reason #1 – Full ownership.

Investing in single-family rental properties gives you direct ownership and control over the asset. This lets you decide on property management, renovations, and other key issues. In contrast, REITs and crowdfunding are more passive, and you rely on the decisions made by others. This is different from deferring to a management team for your day-to-day operations.

When you own the property, you own the property. Period. The land, the home, the appreciation, the equity. It’s yours to do with what you will. With that freedom comes responsibility but also great opportunity.

Reason #2 – The tax advantages.

Investing in real estate through a REIT or crowdfunding platform is less like owning real estate and more like owning stock. When you fully own a rental property, you can take advantage of all the tax benefits afforded to you. Depreciation, writing off maintenance and mortgage interest along with other expenses…the list goes on. In fact, the tax advantages are one of the primary reasons people invest in real estate in the first place. Don’t miss out on all this business offers by compromising on less effective strategies.

Reason #3 – Dual sources of wealth.

REITs and crowdfunded real estate investing pay dividends. However, you also miss out on one of the other lucrative benefits of investing in real estate the traditional way. Investing in rental properties generates wealth in two ways: monthly cash flow from rental payments and long-term appreciation of your property. On the one hand, your residents’ payments work your mortgage down. You’re not paying that debt out of your pocket. So, as debt goes down, equity goes up. 

Over time, your property increases in value. This is the typical pattern for real estate. 

A buy-and-hold investor can reap the benefits of passive income each month, knowing that they can sell that property in the future and make far more than they initially paid. In the meantime, simply owning that asset enhances net worth.

Reason #4 – Hedging against inflation.

Another benefit of directly owning real estate is the strategic defense against inflation. Over the past few years, we’ve felt the pains of excess inflation more than in a long time. It’s eating away at our salaries and savings. We feel it in the grocery bill and see it on price tags. Real estate transcends other investments by actively hedging against inflation.

Real estate grows in value over time, often matching and exceeding inflation rates. Because of this, investors know that their wealth will keep up. We’ve discussed this before, but think about your savings account. Say you had $1,000,000 tucked away in 2000. Pretty good, right? 

In December 2023, you’d need over $1,800,000 to achieve the same buying power. (If you want to further depress yourself with inflation numbers, we used the Bureau of Labor Statistics CPI Inflation Calculator.) While your $1,000,000 in cash isn’t as powerful today, think about if that money was in real estate. The median sales price in Q4 2000 was $171,100. In Q4 2022, it was $479,500. A house you bought in 2000 would be worth considerably more now in the right market. 

Bottom line? If you want to protect your wealth long-term, use real estate.

Reason #5 – No conglomerate middleman.

Piecemeal methods of investing in real estate may be more affordable – but there’s a catch. The performance of those investments is at the mercy of other shareholders and the company running the show. As an individual, you don’t get a say in these decisions. You don’t monitor the quality of the property, renovations, or management. 

When it comes down to it, unless you’re a top shareholder in these projects, you’re of little concern to the entity with actual ownership. They’re leveraging your money and promising dividends. And you’ll get those dividends, and that’s all well and good. But as a real estate investor and as someone with ambitions to secure real, lasting wealth, you should be utilizing the leverage. You should call the shots. You should craft the portfolio you want. 

Don’t let the allure of a cheaper, easier investment rob you of your true wealth-building potential.

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