More often, investors purchase single-family houses for rentals when they are investing in real estate. It is logical that the investor will be glad to see their equity grow. However, owning single-family rentals may not be a better strategy for a real estate investor.
A serious investor in the business should think of changing the strategy. From his experience, Christopher Linkas advice to the investors is to build their portfolio by investing in commercial real estates. Here are some challenges you are likely to encounter when you invest in Single Family Rentals.
- Inadequate cash flows especially if acquired through debt
- Associated with extensive risks
- The investment lack advantages related to commercial investments
- Managing single family rentals is expensive
- The investment is market dependent
These challenges make the single-family rentals inappropriate to justify it as the best portfolio growth strategy. Alternatively, you can invest in commercial real estate passively. Christopher Linkas has invested in the commercial real estate for several decades. Here are some advantages of investing in commercial real estate compared to owning rentals.
- You can invest with professionals in the industry and be able to mitigate loses as a group with the help of the veterans
- Allows diversification as you can select the type of asset, business plan, and location
- The risk associated is less because losses are limited to the amount invested only
- It is competitive when compared to single-family rentals
- The value of the asset is directly related to the operating income.
Even though single-family business is challenging, you can benefit from investing in it. The business is a good starting point for any real estate investment. Christopher Linkas is advising investors to view owning rentals as a small business rather than an investment.
The nature of the business is that one will not easily realize the real intention of purchasing the rental rather they will get experience from the business. The idea of owning rentals gives you an experience that you will learn from rather than giving you the returns you expect.