Investing in real estate is a great way to bring in passive income. When it comes to residential rental properties there are plenty of options to choose from including multi-family properties and single family properties. Multi-family properties are ones that have more than one unit, meaning you can rent out to multiple tenants at one time. A single family property on the other hand is just one unit. Both options can be profitable. However, if you prefer to invest in single family homes, here are three things that you should know.
Financing Can Be A Challenge
Purchasing an investment property is a little different than purchasing a home that you plan to live in. Often traditional lenders have stricter requirements when it comes to these types of properties. When financing a single family home that you plan to rent out some lenders require you to have a down payment closer to 30 percent instead of the traditional 20 percent. Before purchasing it's also a good idea to check your credit score. The higher the score, the better the interest rate you will be able to get.
Consider The Future Value Of The Home
Another thing to consider when purchasing a single family home as an investment property is your plans for the future. Do you want to rent out the home indefinitely or do you plan on selling down the line? Before buying you should take a close look at the neighborhood. If you want to sell in the future, you want to make sure that you purchase in an area where homes tend to appreciate in value. The average appreciation rate for home is 6.4 percent. Of course the appreciation rate can be higher in in-demand areas.
A Real Estate Agent Can Help
When purchasing an investment property it can be tempting to look on your own and skip using a real estate agent. However, a buyer's agent can actually be very helpful. They will be able to find properties that are suitable for your needs. They are also knowledgeable about your local real estate market and can help you find a single family home in an area where rent will be high enough for you to make a profit. While single family homes are more affordable and cost less to insure than multi-family investment properties, getting a good deal will mean even more money in your pocket.
When it comes to investment properties, single family homes are a popular choice. When purchasing a single family home as an investment property it's important to note that getting financing can be more of a hurdle than it would be if you were purchasing a residential home. It's also important to consider the future value of the home and whether or not you will be able to sell it in the future. A real estate agent can help you find an investment home that is affordable and in a desirable location for renters.