“After 32 years of investing, I still buy houses instead of apartments or shopping centers. Why? [Single Family] Houses make me more money with less work than any other investment.
John Schaub, Building Wealth One House at a Time
John Schaub (JohnSchaub.com) is one of my favorite real estate teachers.
When asked, I recommend his book Building Wealth One House a Time to all real estate investors.
Some of the best strategies and investing philosophies I have implemented came directly from John. And some of the biggest mistakes I’ve made were forewarned by John as well!
One of John’s main teachings is summarized in the quote above – stick to single family houses. I would add to this category small multi-units like duplexes, triplexes, and quadraplexes in good neighborhoods.
John teaches that you can’t beat single family houses as investments for a number of reasons. I’ve summarized them here:
1. Hybrid Investments (Best of Both Worlds):
Houses are unusual in the investment world, because they provide rental income but their retail value doesn’t depend directly upon that rental income.
A 10 unit apartment building, for example, will go up or down in value depending upon how much net rent is produced. A well cared-for vacant house can go up in value just like a rented one because your buyer likes the home and the neighborhood, not the income.
2. Safety:
Even during bad real estate markets, ask any banker what they’d rather loan money against – a single family house in a nice residential neighborhood, a large commercial property, or a stock portfolio?
A single family house is usually the banker’s answer. That should tell you something.
Houses are relatively stable and tend to hold their value. There are many more buyers for houses than other types of real estate. Vacancies are much shorter because the demand for residences is always high compared with commercial properties.
3. Non-professional Sellers:
When you buy houses, you often deal directly with a seller who is not a full-time, professional investor. Professional investors normally want to make a profit when they sell, and they’re often better negotiators than you are.
A normal homeowner may be selling for non-financial reasons, and solving that problem is worth money to them.
4. Unlimited Supply of Deals:
Every day new sellers decide to sell their houses. People move, start families, get divorced, retire, and pass away.
There are many more single family houses in an average town than any other type of real estate investment. This makes for an abundant source of new deals.
5. Lower Management Tenants:
Compared with apartments, lower end houses, and mobile homes – tenants for decent houses in decent neighborhoods are much more self-sufficient and tend to pay on time more often. If you value a wealth of free time and addition to a wealth of money, this factor is crucial.
6. Divide Your Money Into Multiple Baskets
One of the key principles of investing is to diversify. This basically means don’t put all of your eggs in one basket in case you’re wrong or you screw up (which happens to even the best).
Owning single family houses allows you to spread out investment capital among different deals in different neighborhoods. For example, with the same amount of money it takes to buy one 10-unit building in a single location, you might diversify by owning houses in several different locations.
7. Get Retail and All Cash When You Sell:
This is perhaps the most compelling strength of single family houses.
The federal government has a long term vested interest in subsidizing the housing market. It’s very political that people are able to buy houses. Therefore many loan products are available that allow buyers to purchase a house and pay you all cash.
When you sell a mobile home park, commercial building, or lower priced double wide or house, it’s much more difficult to get cash at a retail price when you sell.
Final Thoughts:
The beautiful thing about a free market is that everyone can do business in their own way and it still works.
This philosophy of investing in real estate is just one of many.
There are other investors who love large mobile home parks. Some who buy large multiunit buildings. Still others swear by commercial shopping centers.
Each property type and specific location comes with its own set of pluses and minuses. The meta-lesson here is to consider your own choice of investments thoughtfully.
If the benefits of single family house investing suits you, be sure to check out John Schaub as one of your sources of education. And of course, keep reading more of my blog and E-Newsletter as I’ll share more examples and strategies from this philosophy.
enthusiastically your coach,
Chad Carson
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Thank you for pointing out why single houses are the best investments. This can definitely help people to decide which real estate they want to investment on.
I’m partial towards SFH as pointed out. But I also understand there are benefits to all sorts of types. The important part is matching up your needs/skills with an asset that makes sense. Single family houses just happen to match up with a lot of people.
I have been dreaming of my own house since I graduated because I don’t want to be dependent on my parents. It is true that houses are relatively stable and its value increases as time goes by when it is taken care of properly. Moreover, I’m looking for a real estate agent that can provide me options for the sample single homes that are for sale.
That’s great! I love that dream. And it works even better if you can find some roommates to pay you rent for the extra bedrooms. You can sometimes even live for free by doing this “house hacking.” I wrote an article on it here: https://www.coachcarson.com/house-hacking-guide/
Good luck!
I love how you said that a vacant house can go up in value because that makes me feel a lot better about renting a house out. I’ve been thinking about getting a single-family home to rent out to students because I live right next to a college. It’s nice to know that occupied or not, the value could increase.
I rent to students as well, and it’s done very well for me. Most of mine are small apartment units, but a house can work just as well. I hope it works out well for you!
It’s good that you point out that single-family homes are a good way to invest your money. I’ve been looking for a new asset to purchase with my extra money, and I’m considering buying some single-family homes. I’m going to look for a good real estate agent that can help me purchase some single-family homes.
Thank you for reminding me that single-family homes are the best choices for investments as they are stable and they tend to hold their value. My parents are considering moving into a new place and they wanted something that they could put up in the market after a few years. I’d tell them to invest in those kinds of homes since it can go up in value just like a rented one if the property is well-taken care of.
As you mentioned, even in times of bad real estate markets, bankers are more willing to give loans for single family homes. Do single family homes tend to hold their value better then other housing options? My husband and I are looking for a place to live, and we are trying to decide on if a condo or a single family home is better for us. I will have to keep these thoughts in mind as we begin to make the decision.
My husband thinks we should start investing in single-family homes. That’s why I liked it when you said a normal homeowner might be selling their home for non-financial reasons. You could very easily find a good deal that way!
Thanks for reading, Rita. Yes, finding someone not just trying to sell for top dollar is a key to buying good deals on single family houses. Good luck to you and your husband with your next investments!
I love how you said that the federal government is helping to subsidize homes to ensure that people can buy houses. This seems like a great reason to buy a single-family home because you could get it for cheaper than market value. Considering how much growth is happening across the U.S. getting a cheaper home would be a real blessing for some people.
It’s interesting how you explain that it might take the same money to invest in a building with 10 apartments than buying single-family homes in different areas. My boss told me that he would like to diversify his wealth by investing. I will recommend him to read this interesting article so that he can see the benefits of buying angle family homes to rent them out.
It’s helpful that you point out that buying a single-family home is a great way to invest your money. I’ve been looking for a way to diversify my investment portfolio, so I’m considering buying a single-family home. I’m going to look for a good real estate agent in my area that can help me purchase a single-family home.
I agree with you that single-family houses bring in more chances of deals in a town. I see a lot of people in my area buying single-family houses for investment and was thinking if I should be doing the same. I would definitely talk to my husband about it and see if he agrees with me about buying a single-family home as an investment.