How can I make money consistently renting single family homes?

I own 24% of a business with access to millions in cash. The majority owner is looking for new investments. Our current project, an RV park, isn’t performing as well as we would have liked… therefore, he is hesitant to invest in anything new.

I know people who own multiple houses and rent them all out for a profit no problem…

He thinks the maintenance would make the project unprofitable…

How do you rent a single family home for a profit?

Hey, it’s New Years. I’ve got time to write a novel.

There’s several profit centers potentially available on any real estate invest investment, including houses. In no particular order:

  • Market Appreciation
  • Forced Appreciation
  • Inflation
  • Tax Treatment
  • Rental Income (Cash Flow)
  • Debt Reduction
  • Financing Leverage

The more of these you can take advantage of the more profits you can take.

Not every property offers all these profit centers. Not to mention there’s investing for cashflow, and there’s investing for equity. And any combination in between.

Grossly generalizing here, cash flow plays are typically made on older properties where appreciation is less of a consideration. These are often stagnant areas, and even economically depressed regions, with high vacancy factors.

However, the true cash flow plays, can be VERY cheap to purchase. Many investors come into these deals, without really understanding what they’re getting into; pay too much; and become quite, quite flexible on their exit strategy. Seller financing is all too common.

To continue grossly generalizing here, appreciation plays are often made on newer, pride of ownership properties, where the market is tighter, increases in market values/rents are expected to trump any intervening negative/neutral cash flow.

Then there’s anything in between these extremes.

Frankly, you’re not gonna find very many people wanting to wait as long as you might, to bury money in single family units, until they become profitable enough to sell, or realize cash flow from …or pay off.

We had several partnerships in single family units, and somehow one partner, or another wanted out early. It wasn’t always pleasant. Of course, whomever wanted out early, only got to take what they invested, and with no equity profits. And it included trading out partners, not liquidating the assets. There’s a difference, and that was the rule coming in. We traded positions with one partner. He gave us half of one of the deals, and we gave him our half, and we each ended up with a whole house to ourselves. Yay.

So, you’ve got to know going in, what you’re investing goal is; cash flow, equity, or some combination, and the expected term of the investment. Failure to understand why you’re investing, and what you’re investing for, will result in misunderstandings, or worse.

To specifically answer your headline question, I would advise you invest in apartments for cash flow, not houses. Houses are mostly an appreciation play, or for the self-loathing, tortured souls, that ‘get off’, so to speak, “lording over” ghetto peoples.

Apartments are for income. That’s not to say that there aren’t more self-loathing, tortured souls, that ‘get off’, so to speak, “lording over” ghetto apartment dwellers. It’s just that they do ‘that’ and put lots of money in their pockets.

And that’s why we calls apartments, “Income Properties.” Who knew?

Meanwhile, lots of investors start with houses, because that’s all they can get their minds around investing in. Not to mention, they can lie about being owner-occupants, and put 1% down, and then rent out the house they lied about wanting to live in, and leverage themselves into a management headache. Yay for them. Meantime, starting with houses, is the accepted, conventional way to begin investing. Never mind the liar loans.

Meantime again, investing in SFH rentals, has got to be the hardest, if not most inconvenient, and risky investing strategy there is.

The financing is more difficult to qualify for.
The maintenance is less efficient and non-amortized.
The cost for professional management is prohibitive for most.
The impact of one 30-day vacancy can be catastrophic to the bottom line.
The vandalism from one disgruntled tenant, can upend three year’s worth of cash flow.

Since you’ve got money available for bigger league deals, and you’re not having to scrape and scrimp and “landlord” over ghetto dwellers, necessarily, to finally get into the big leagues, you should just shoot for bigger league plays at the get-go. You’ve already got experience with ornery RV dwellers. It’s the same thing, only your customers are grouped closer together.

This is what I did …after wading in the ghetto, and having severe cash flow problems as a result. I found a non-performing, 30-unit, apartment complex, that was effectively vacant; found a partner with some rehab money, and turned the project around. I made a LOT of money off that deal.

I could never have made the same money investing even in 30 single family houses.

That’s all I got.

I have to agree with Javipa. Though investing in SFR can earn a decent return, they are time intensive, difficult to finance over 10 purchases, and have higher maintenance costs than other investments.

I would also recommend investing in larger apartment complexes. If managed well, they can be a very stabilizing investment within a portfolio.

We are buying an apartment complex within the next few months. We haven’t decided on the particular one, but it will be on the gulf coast of Florida, probably around 8 units, and probably cost around $400,000.

I look forward to this new project. And once this goes well, we will be buying more.