Single-family rentals are hot right now for a variety of reasons. Baby boomers are living longer—in their own homes, which means less inventory for new home buyers. And, home prices are rising faster than wages (about twice as fast, experts say). So, even though Millennials would like to own, they just can’t afford to buy. The good news for real estate investors is that these factors make people quite happy to rent homes, instead. It also means your monthly rental charge can be a significant gain in this increasingly competitive market.
You might be thinking that now is a good time to invest.
And, a good number of people would agree. In fact, according to a recent article published by National Real Estate Investorâ, single-family rentals (SFRs) deserve a place in your portfolio as a preferred alternative to commercial real estate investments. And, they provide some pretty solid reasons to back that up.
National Real Estate Investor Stats on Single-Family Rentals:
The commercial real estate industry seems to have peaked in a cautious anticipation of a cyclical downturn in the economy. At the same time, there was a 9 percent increase in the cost of low to mid-priced homes—and statistics show single-family rentals facilitated those price hikes in 2018.
You reap returns equal to or better than other commercial real estate investments with less risk per unit. And, this is not a trend. With the exception of multifamily property and storage units, SFRs have topped the average annual, total returns of other commercial real estate since 1996.
And, you can score better returns than stocks and bonds deliver, too. In fact, for over 22 years, the average returns are not only higher, they are much more dependable than other returns on the market.
Other Benefits of Single-Family Rentals
There are quite a few additional advantages of SFRs besides the ones above. You have the potential of property appreciation over time. Selling a desirable home at the right time can produce a tidy little nest egg (and even more capital to invest). And, you don’t need to be a sophisticated investor with unlimited funds to buy a single-family rental. In comparison, although multifamily property may rake in larger monthly gains monthly and fetch a higher gain upon sale, you’ll need quite a bit more capital to purchase and operate multifamily homes. The fact that SFRs are less labor-intensive and easier to manage than larger properties is a plus for many.
So, if you are looking for an investment that could net you a desirable amount of monthly income, SFRs are alternative assets worth looking into. And, there are several strategies you can use to invest. You can use your personal funds, of course. But you can also invest using funds in your IRA—without having to take a taxable distribution to do so.
Self-directed retirement plans allow you to choose your own assets, and you can use alternatives like real estate, private equity, and private mortgages. Assets are purchased and owned by the account. All income is deposited directly into your self-directed plan—including capital gains from the sale of property—on a tax-free or tax-deferred basis. If you’d like to learn how to use a self-directed plan to build wealth for your own retirement, contact Advanta IRA today.