| We have discussed the value of investing
in real estate, but why Temple City single family homes? Why not invest in raw land,
apartment buildings, shopping centers, or office buildings? There is certainly
nothing wrong with these other types of real estate - if you know what you are
doing. But single family homes have many advantages over other forms of real
estate. 1. SMALLER AMOUNT OF MONEY NEEDED - The
average person simply does not have the money to go out and buy a shopping center
or apartment building. As was discussed before, it is possible to buy a single
family home with 10% or less down payment. This means that you can buy a $100,000
house for only $10,000 down. It is entirely feasible for the average person
to save $10,000 to buy their first investment property. Single family homes
are great for the average Temple City real estate investor.
2. PEOPLE ARE FAMILIAR WITH HOUSES - Most people are
not comfortable with shopping centers or apartment buildings. They don’t know
what the rents are, what repair costs are, etc. On the other hand, most people
do understand single family homes. They probably have seen the value of their
own Temple City home go up over the years. They know psychologically that it is
a good investment. They know roughly what it costs for repairs. People buy what
they are familiar with!
3.MORE FLEXIBILITY -Let's assume that for the same amount
of money you could either have 5 houses or 1 apartment building. If you needed
money, with the apartment you could either have to sell the whole thing, refinance
the whole thing, or bring in a partner on the whole thing. With the 5 houses,
you could sell one of them, refinance one, or bring in a partner on just one.
It is comparable to having five $20 bills versus one
$100 bill. If you go in to buy coffee at the convenience store with the $100
bill, they might not take it. Like the $100 bill, the apartment building can
be harder to get rid of. Houses are more liquid. In most areas single family
homes sell in 120 days or less. Apartments can take much longer. More people
can afford single family homes and more people want them.
4.MORE CONTROL -With an apartment building, all of the
tenants know each other, and they will know what they pay in rent. That means
it is difficult to charge one tenant higher rent than another. Plus, if one
tenant plays the stereo too loud or causes other problems, YOU will get the
complaints. With houses, they are generally scattered around the area. You can
raise the rents individually, offer lower rents to excellent tenants, etc.
5. HIGHER EQUITY BUILD UP - There is usually more appreciation
in Temple City California single family homes than in apartments and other types of
Temple City real estate. Apartment buildings are valued based on the income approach
(how much money they bring in). Single family homes are valued based on comparable
sales. This means that your investment houses are valued according to what the
other homes in the neighborhood are selling for. Owning your own home
is part of the American dream. A home is a psychological desire. There is certainly
more demand for houses than apartment buildings.
6.LESS CHANCE OF RENT CONTROL - Rent control is where
the government tells you how much you can charge for rent. In many big cities
with rent control, buildings have been abandoned because the owners could not
charge enough rent to cover their costs. As a property owner, rent control is
a very bad thing. Fortunately for the single family home Temple City real estate
investor, most rent control laws only apply to buildings with 4 or more units.
7.LESS RISK -With single family homes, you don’t
have all your eggs in one basket. The homes are usually scattered around the
area. With an apartment building, if the area goes bad for some reason (i.e.
a factory or freeway goes in across the street) you are sunk. Single family
homes also tend to attract a better class of tenants than apartments. Apartment
dwellers are usually more transient- single people or young couples that will
soon outgrow it and want to move to a Temple City California house. Single family homes
generally attract a more stable tenant- like families with kids in school who
are less apt to move frequently. Additionally, most people who live in apartments
won’t do minor repairs and maintenance like those living in a house. Other forms
of Temple City real estate are fine, but they may require more money and sophistication
than the average investor has. It is easy to see that single family homes are
a fantastic investment for just about everyone.
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