When people think of real estate investment, they typically conjure up images of rental apartment complexes, condominiums, or commercial spaces. Many real estate investors specialize in those types of rentals without giving much thought to investing in single-family homes. However, single-family home investment can be an extremely lucrative brand and investment strategy. Here is why real estate investors should seriously consider building a portfolio consisting of single-family homes.

The probability of finding inefficiencies in the single-family market is higher than any other real estate asset class

There are over 70 million single family homes in the US vs. an estimated 500k apartment buildings. Thus the probability of finding a “mispriced” asset in one market vs. the other is 140:1.

Even the rental market in single family homes is larger

Although people may generally prefer to have a home to call their own, many are still leery or unable of actually buying a property. There are a number of reasons for this, with lack of stability being the biggest issue. That said, the majority of renters still prefer single family homes to apartment complexes. In the United States, single-family houses for rent represent the largest real estate investment asset class, valued at approximately $3 trillion. This figure outstrips the multifamily rental market of approximately $2.5 trillion and dwarfs all of the other categories.

The single-family market is more liquid then other investment markets

Selling single-family homes from your portfolio is simply easier than trying to sell an apartment complex or a commercial building. This is because there are more buyers that will be interested in a single-family home. Not only can you market a rental property to the investment community, you can also remove the tenant and market the property to the owner occupied segment which is far larger.

Single-family offers multiple ways to capitalize on your investment

Single-family homes often appreciate in value over time, so an investor can generate returns from that alone. Unlike most other types of real estate investments that are more correlated to interest rates, an investor in the single-family space can participate 1:1 in rising home prices. Said another way, you are not reliant only on the cash flow generation of the property to capitalize on your investment.

Real estate investors should work at cultivating a brand, and single-family homes can be a very good type of real estate to invest in on that front. To build your portfolio correctly, remember to have the aid of a real estate agent who specializes in the rental market as well as the owner-occupied market.