Single-family homes can offer an easy entry into property investment and help you diversify your portfolio. But even experienced real estate pros have to take care to ensure they get the most from this type of nest egg. Thinking of adding investment property to your reserve fund? You’re not alone. 

But while you surely understand the benefits of real estate as an investment — equity, ownership of a tangible asset, and appreciation, just to name a few — when it comes to taking the leap, you might feel stuck. Even for real estate professionals, it’s difficult to know where to start.

While there’s no one-size-fits-all property investing strategy that will always outperform the rest, rental properties — and particularly the humble single-family residence — have been performing exceptionally well in recent years.  Over 36 percent of U.S. households were renting in 2015, according to a report by the Joint Center for Housing for Housing Studies at Harvard University, which is the largest share since the 1960s. And 40 percent of the nation’s renters are in single-family housing, up from 34 percent in 2005. We’re experiencing an unprecedented demand for this type of housing, and that’s fueling surging rental prices across the country.

One of the great advantages to investing in single-family homes is the relatively low entry point. As any residential real estate practitioner can confirm, this type of property is by far the easiest to start with. Compared to condos or multifamily residences, the required down payments and outgoing expenses are often significantly lower. Meanwhile, you can expect steady returns on a single-family home investment. According to RealtyTrac, the average annual gross rental yield for properties purchased in the first seven months of 2016 was 8.7%.

Nationally, rents for single-family properties are on the rise. According to a recent report by Morningstar Credit Ratings, LLC, increasing rents on single-family properties throughout the U.S. suggest that tenant demand remains robust. And while many investment options struggled to provide substantial returns throughout 2015, another recent Morningstar analysis found single-family rental investments outperformed expectations in terms of both rental income and appreciation in a number of markets throughout the country.

At the end of the day, finding success with single-family rentals comes down to two very simple things: finding a winning property and ensuring that it’s managed as profitably as possible. Here are some key steps to follow: Know Where To Look; Find the Right Property; Run the Numbers; Manage Your Property Profitably.

Give me a call or send an email to discuss the greater-Tucson real estate market.  Buying and/or Selling?  Put me and my team to work for you.

Exerpt from Dec. RealtorMag by Kevin Ortner