Investing in real estate is an efficient way to regulate your finances and add another stream of income. There are thousands of strategies available on the internet for beginners to choose from. However, having so many options can be quite intimidating and overwhelming.
To narrow down the right option for you, Graana.com, Pakistan’s smartest property portal, has come up with an easy and safe investment method, through which you can increase your monthly income – SFR in real estate.
What Is SFR in Real Estate?
SFR is the abbreviation of the term ‘single-family rental’, which refers to separate rental property. It mostly comes with an attached yard and parking space.
These investment properties are recognised for their benefits, reasonable rates, and demand. This is the reason why single-family homes are a good go-to investment for novice real estate investors.
Why Should You Invest in SFR Real Estate?
The real estate sector has a lot of potential for buyers, sellers, and investors equally. SFR real estate is in no shortage across the housing market in Pakistan, but availability is not the only reason why you should be investing in single-family homes.
Following are a few compelling reasons why you should invest in SFR real estate.
- Single Family Homes Are Profitable
- The end goal of any kind of investment is to make financial gains. One of the easiest ways to achieve this goal is to invest in single-family residential properties.
- Since SFR properties bring in more rental income per unit, a single-family rental can generate more positive cash flow.
- Moreover, the tenants living in the SFR property have to pay their bills themselves, and landlords are not bound to pay for any utilities, allowing you to save more money.
Real estate investments require an immense budget, however, with SFR investments, this problem is minimised. Single-family rental investment properties are less expensive as compared to other types of real estate, for example, multi-family properties. The reason is simple –, SFRs are smaller.
Affordability is the factor which makes investing in SFR real estate easier and more accessible. Even if you have to get a loan for investing in one, financing for it will be a lot easier.
Matching funds for a single-family unit also becomes easier, particularly when securing a loan. This is why millennials and most first-time investors are more inclined to invest in SFR properties.
Single Family Homes Are in High Demand
Another reason why one should consider investing in SFRs is the surge in their demand. As per the reports of various resources, single-family residential have been seeing low vacancy rates during the past few years.
According to the reports of CNBC, the vacancy rate of single-family rentals was 6.8 percent, which is 7.1 percent lower than that of the previous year.
Although investing in real estate looks like an alluring opportunity to earn passive income, not everyone has the skills to manage it all by themselves.
Most people tend to hire professionals to guide them through the process or simply manage everything. This whole thing sounds like a lot of hassle, which you won’t have to go through while investing in SFR property.
SFRs are usually small one-unit properties, which makes them easy to manage. Also, as a landlord, you won’t have to spend much on maintenance either. Hence, taking care of your rental home is easy.
Things You Need to Know About SFR in Real Estate
Another reason why single-family rentals are seen as a good investment is that rental property financing is quite simple. This all roots in the cheaper rates of SFR properties as compared to other properties. As mentioned before, not a huge chunk of your capital goes into purchasing a single-family unit. It is relatively affordable.
The major reason is that the SFR down payments are mostly lower in comparison to other residential properties. The smooth and hustle-free financing is making investing in SFR more accessible to noob investors.
Advantages of SFR Real Estate
Here are some of the advantages of investing in SFR real estate:
- Profitability is the prime factor for people to invest in single-family rentals.
- Contrary to other real estate investments SFR typically yields more per unit rental income per month.
- Tenants usually see the SFR as their own home, hence they don’t damage the property.
- Single-family rentals are usually small and don’t require much maintenance.
Disadvantages of SFR Real Estate
Now that we have discussed the advantages of single-family rentals, let’s talk about some of the downsides to them.
- Keep in mind that when you buy SFR real estate, you buy them one at a time, so it can take you longer to scale your portfolio.
- Also, if your SFR real estate properties are in different locations, for example in a different province on the other side of the country, managing tenants, as well as any necessary repairs, can become an issue.
- Plus, prolonged vacancies can have a far greater impact since there are no other units to compensate for the loss.
Is SFR in Real Estate Right For You?
It is also important to consider the responsibilities associated with property management. Many real estate investors, especially when starting out with an SFR property, will opt to take on the role of a landlord. This can come with some pros and cons. For instance, if you own more than one SFR in different locations, traveling between properties to manage tenants and repairs can become a hassle. Consider your schedule, as well as the costs of working with a property manager.
When compared to other real estate investing strategies, SFR properties can be a great opportunity. However, they do not offer the same protections as multifamily investing. If you face a vacancy in a single-family home, you lose 100 percent of that cash flow. In multifamily properties, multiple units can shield some of the missing rental income that comes with vacancies. With SFRs, there are no other units to help offset your loss.
As we are facing a recession currently, everyone is looking to obtain more than one stream of income. Investing in SFR is one of the easiest and most promising ways that will let you earn some extra cash. You won’t be required to actively manage it too, hence making it the right kind of passive income for those who work full time.
In this blog, we discussed SFRs in considerable detail. For more information, visit Graana blog.