August 6, 2020

Single Family Home Rentals Are a Growing Segment of the Housing Market

EXCERPT:  Renting real estate has long been lucrative for investors, but a spike in demand for single-family homes presents a unique opportunity to grow an investment portfolio.

The coronavirus pandemic has sparked increased interest in single-family dwellings that offer much more space and freedom, as opposed to the restrictions that condo and apartment dwellers face.

The physical distancing challenge that the coronavirus pandemic has presented over the past few months has many Americans rethinking their living arrangements. More specifically, the constraints of living in multi-family dwellings like apartments and condos have prompted many homeowners and renters to set their sights on single-family homes that promise a lot more space, making it much easier to maintain the six-foot distance amongst each other in an effort to slow the spread of the virus.

While there has been an uptick in interest for the purchase of single-family homes, there has also been a growth in rentals of this particular segment, presenting a unique opportunity for investors.

Opportunity for Real Estate Investors

Features like spacious yards, room for pets to roam, home offices, and plenty of space between neighbors have become even more coveted over the past months, and single-family homes fit the bill. With such a significant spike in demand for single-family home rentals, anyone owning these types of investment properties is profiting handsomely in this environment.

Such demand for more spacious homes is likely not a short-lived trend that will die out whenever the pandemic dissipates. Instead, industry experts and advisors expect ongoing demand for single-family home rentals, which offers investors a lucrative opportunity to jump in this market and capitalize on the growing demand.  

Defaults on these types of homes may be difficult to deal with over the short-term. Still, the recovery in this specific asset class will likely be earlier than other residential asset classes thanks to the low supply of newly-built rental homes and the need to hedge capital against risk.

Whether they choose to rent to free up capital or because they can't get a mortgage, many Americans are renting single-family homes in an effort to get the space they need to suit the changing lifestyles that COVID-19 has presented.

For the first time in the country's history, the growth of rental households has outpaced homeownership. And with the growth in remote working and lifestyle changes brought on by the current health crisis, the long-term outlook for income opportunities in the rental market of single-family homes is as healthy as it's ever been.

Catering to the Needs of Americans

Many people who rent single-family homes in the suburbs are well-earning households that want the space for their families to roam and good schools to send their kids to, all without having to dedicate themselves to years of mortgage payments. Rather than tying up their capital in a mortgage, they're freeing it up to invest elsewhere, all without having to give up the type of living arrangement that best suits their needs.

For others who earn less, homeownership may still be out of reach, especially when it comes to accumulating a sizable down payment or building the financial history needed for mortgage approval. But rather than renting an apartment, renting a detached home with plenty of private space is a lot more attractive, and may even be just as affordable - if not more so - than renting a typical apartment or condo.

The growth of this type of investment opportunity is an interesting one, and while it may have seen renewed interest as a result of COVID-19, experts forecast demand for single-family rentals to carry on into the foreseeable future.

Sign up for our newsletter for the latest industry updates.