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Jan 25, 2023

Single-Family Properties

Over the past two decades, single-family properties have proven to be a popular and reliable source of income and appreciation. The Joint Center for Housing Studies of Harvard University report suggests that the growth in this market is due to an increase in renting among demographic groups that traditionally lean towards homeownership, such as older age groups and families. This shift may be attributed to factors like increasing home prices, higher lending rates, and a preference for flexibility in housing options.

For real estate investors, evaluating different types of properties and understanding their distinct advantages and drawbacks is crucial for building a well-rounded investment portfolio. Before exploring the various financial benefits of investing in Single-family homes (SFHs), it is essential to comprehend how they differ from other property categories. 

Real Estate Block Sections

What is a single-family property?

Single-family homes and single-family rentals, commonly referred to as SFHs and SFRs respectively, are among the most traditional and widely known types of real estate investment. These properties fall under the residential real estate category, which encompasses housing units for 1-4 families, and are designed to house single families or a small number of tenants. They are typically standalone properties, set on their lot and separate from any other housing unit. For real estate investors, SFRs offer a unique investment opportunity with the potential for steady cash flow and long-term appreciation. 

Liquidity considerations

Real estate is considered an illiquid asset, residential real estate, however, is generally considered a more accessible and dynamic asset category compared to all other real estate types (commercial, industrial, and land investments). Residential real estate properties are sought after by both investors and homeowners, creating a wide range of potential buyers for residential properties and shorter transaction windows. 

Larger Market

As more efficient and easier-to-navigate real estate opportunities, residential real estate serves a large market allowing for more opportunities to identify properties that may align with one's investment goals and strategies. The larger pool for single-family properties potentially creates more opportunities for investors to maximize their investing goals by providing an abundance of potential tenants, more property options, and the ability to capitalize on growing markets. This diversity and flexibility makes it easier for investors to achieve their desired returns.

Scarcity 

Single-family homes, in particular, are in high demand and offer strong appreciation potential. Despite the increasing need for housing, there remains an undersupply of homes in certain geographies as new home construction is low compared to historical standards.These conditions position single-family homes to face scarcity resulting in strong appreciation potential for investors. The demand for single-family homes has increased as individual preferences for larger living spaces and higher appreciation rates continue to grow. 

Furthermore, the ongoing demand for housing helps reduce the correlation between the market for single-family properties and the broader business cycle, making SFRs a potential diversification opportunity for investors. Single-family properties can help provide a buffer against market fluctuation, and reduce the overall risk in an investor's general portfolio.

Cash flow

Residential real estate investing offers several benefits, one of the most notable being steady cash flow.Though effective property management, investors can help minimize vacancy and turnover rates and subsequently maximize cash flow. Among the different types of real estate investments, residential properties stand out for their income-generating potential. 

Why does Landa invest in SFRs?

Single-family properties represent a resilient asset class that we believe will continue to grow accordingly. Here are several reasons why:

  1. With the institutionalization of single-family homes, liquidity will continue to improve as more resources and financing opportunities become available to investors. 

  2. As new professional ownership models continue to emerge, investing with lower minimums and new liquidity models including secondary marketplaces will continue to generate value over time delivering sustained growth to investors. 

  3. Landa has historically targeted and will continue to focus on investing in up-and-coming markets in and around major metropolitan statistical areas where economic growth will develop over time. 

  4. Landa has historically targeted and will continue to target geographical areas where demand is high, qualifying properties to appreciate over time.

  5. The unique characteristics and unit economics of single-family properties enable Landa to deliver stable and growing cash flow to investors through internal management strategies such as ongoing property management. 

The takeaway

Single-family properties can provide investors with a valuable addition to their portfolio, offering opportunities for growth and value appreciation.

If you are considering investing in single-family properties, it's worthwhile to do your research and ensure that the properties align with your investment goals. You can find more information about our current offerings on the app. 

As always, conduct thorough research before making any investment decisions.

Sources:

  1. https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Americas_Rental_Housing_2020.pdf

  2. https://www.housingwire.com/articles/u-s-housing

  3. https://www.marketwatch.com/story/the-new-housing-play-helping-priced-out-renters-become-long-distance-landlords-2018-07-30

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