| We have discussed the
value of investing in real estate, but why Prescott 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 Prescott 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 Prescott 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 Prescott Arizona single family homes than in apartments and other
types of Prescott 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 Prescott 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 Prescott Arizona
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
Prescott 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. |
