Single family rentals are a popular real estate investment strategy. As the new year begins, let’s take a look at SFR real estate trends to consider.
Many investors who invest in rental property tend to navigate toward single-family residential rentals. They may have a portfolio filled with all types of real estate and other investments, but there is a good chance that there is a single-family residence or two. The reason for this is that, over the years, many have found these homes to be a smart move in diversification. They tend to appreciate over time and are relatively easy to manage – especially with an experienced landlord.
SFR Real Estate Trends
Case-in-point, COVID-19 hit our economy hard in many different ways. A lot of small businesses closed up and many lost their jobs. One thing that continues to successfully climb despite it all? Single-family residential rentals. And, believe it or not, in many areas, rents are climbing, too.
Let’s take a closer look at these SFR real estate trends as we head into the new year.
1. Occupancy Rates
Occupancy rates have gone up considerably. Referred to as The Great American Move, people all across the country have made some changes to where they live as a result of the global pandemic. It could be due to job situations, a desire to be closer to family, or just wanting a change thanks to more freedom and work-from-home positions. Whatever the reason, the U.S. saw the biggest increase in occupancy rates – hitting 97% mid-year. That’s incredible. And the vacant-to-occupied time is short and fast, too. This implies that rental homes are filling quickly, reducing your vacancy rate.
2. High Rental Rates
SFR real estate trends are also seeing higher rental rates. These new tenants are paying roughly 17% more than the prior tenants. Rental rates are surging across the country – especially for single-family residences.
Landlords took a really big hit in 2020 due to the eviction moratorium and inability to deal with non-paying tenants – some legitimately due to the pandemic, others likely taking advantage of the situation. Many left feeling helpless about their investments. Regardless, landlords now have the upper hand in the rental market.
Due to the high occupancy rates and the demand for rentals, many landlords have used the situation to their advantage and have hiked up the rental rates on vacant single-family homes – as well as on existing tenants who are interested in renewing their lease.
3. The Rise of Home Prices
Despite the rise in home prices for initial investments, investors are noticing that the rental rate that is common in most local markets still allows the investment to make sense. More and more people are moving out of the apartment or multi-family home living situation and are seeking single-family residences. In fact, there are many predictions from those in the industry that the trend will continue to grow and more people will begin to seek SFR rather than apartment-living.
There has been a slight, steady increase in those moving out of apartments and into single-family rentals. But since COVID-19 hit, this seems to be more of a trend. Whether it has to do with spreading out away from others and shared living spaces due to health and safety reasons, looking for more space with a backyard due to spending more time at home, or simply having more freedom thanks to remote work, we may never truly know. But, there is a good chance that these things are playing a role in the trend.
4. Big Players in the Space
Along with individual investors, there are some big players in the rental game these days. Throughout the country, and heavily in Arizona, Texas, Alabama, and Georgia (primarily Atlanta), large corporations and investment firms are trying to buy up land and create build-to-rent communities. Rather than use the property for apartments or other multi-family living, many are considering single-family residential rentals. With tenants willing to pay a premium for an SFR new construction in a great area, it may not be a bad idea.
5. Benefits of Investing in SFR
If you are an investor, whether seasoned or new to the game, you may be wondering if there are any additional benefits to investing in a single-family residence. Sure, the trend looks great, but are there other perks to owning these types of rental properties?
- You are more likely to find long-term tenants in a single-family residence than you will find in an apartment.
- There is a consistent resale value. Unless something drastic happens, most single-family homes come with a decent level of appreciation over time.
- Easier to purchase if a new investor. Multi-family investments can come at a high cost. For new investors, this is not always a feasible option. SFR is much more affordable – and it comes with cheaper property taxes, too.
- There is less to maintain. You don’t have to worry about multiple tenants or many different issues going wrong all at one location.
- Higher-quality tenants tend to gravitate toward single-family residences. Generally, you will find tenants who are looking for a long-term residence and are more likely to abide by the lease. This is not always the case, so you still want to make sure you have a thorough tenant screening process.
6. Weigh Your Options, Hire a Property Manager
Not every investment type is for everyone. Depending on where you are looking to purchase a rental property as well as what your financial and investment situations look like, you may or may not find a single-family residential rental a wise choice for you. Weigh your options, talk to your advisors, and do what is right for you.
If you do decide to go with an SFR rental property based on the SFR real estate trends, then you may want to consider hiring a professional and experienced property manager. Unlike apartment and multi-family buildings, single-family homes can be spaced out and inconvenient when it comes to your time management. At Real Property Management Evolve, we understand the rental business in and out. We have extensive experience and the most advanced systems for managing every aspect of your single-family residential property rentals (multi-family, too).
You stay up on the SFR real estate trends and we will take care of your properties as you invest in them.