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Investing in Single-Family Homes - Black Real Estate Group
Refer Black Real Estate

In my 20+ years of real estate investing the prime driver in my portfolio has always been the single-family home, whether that be owner occupied, long term rental, or vacation rental. If you focus on the right fundamentals it is a fantastic vehicle to grow wealth and passive income.

Why the Single-Family?


First and foremost, the competition for these homes is less than for multi-family housing. I’m often competing with first time buyers who are generally less knowledgeable about the investment side of a purchase. Anyone who has worked with me knows my love of the mid-century rambler. These are the post war homes that were built as baby makers during the 50s and 60s boom after World War II. They were generally built by small builders, with old growth lumber, and post war technology. For example, copper piping replaced galvanized steel, romex wiring replaced knob and tube wiring, and poured concrete foundations were poured considerably stronger. The baby boomers grew up in these homes and in the last 15 years or so I’ve seen a movement of these same boomers downsizing back into these homes as their children flew the nest. Kids of these boomers also love ramblers as their entry home, as do investors for their simplicity and quality of construction. For these reasons the mid-century rambler is an ideal play as an investment property..a great home to rent out with minimal overhead and a popular style to meet the needs of retiring boomers (with bad knees, hence the need for one level), their children, and investors.

Location, Location, Location


Another benefit to these this housing style is where they were built. Take North Seattle for example; the old city line is 85th Ave. Prior to the war, the city was already built out up to 85th and even further in some areas like Maple Leaf and up to Northgate Way, so the post war housing boom generally happened North of that in areas like Pinehurst, Jackson Park, Haller Lake, Olympic Hills, and Crown Hill to name a few. These communities have now become very popular for first-time buyers, empty nesters downsizes, and investors. They provide larger lots and cheaper prices per square foot while still being very close to the major employment areas of the city. This is where I often direct my clients looking for their first investment property.

Know your Numbers


Breaking down the numbers is just like you would do for a triplex. Calculate your gross annual income, back out expenses and vacancy to establish your NOI (net operating income), and then divide that into the purchase price (plus upgrades after closing if there are any) to determine your Capitalization Rate (Cap) or rate of return on your investment. A good number to shoot for is about 5-6 percent. The key to a good investment is to buy a great piece of dirt with a structure on it that you can improve with sweat equity and then let your tenants pay off the mortgage for you.

Whether it’s a single-family home near where you live or a vacation spot in a place you’d love to spend a month or so a year at then rent out the rest of the time, feel free to reach out to me if you’d like to sit down for a one-on-one to go over how to use real estate to build wealth and balance your portfolio!