Breaking Down Rental Real Estate – Part 4: Single-Family Homes

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I am absolutely in love with learning and sharing all things real estate. I’m an agent for Jacaranda Real Estate In Harare, Zimbabwe. This blog will be the ultimate resource for all things real estate so subscribe and stay tuned.

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Continuing our series, in this post I’ll be covering the core aspects of renting and renting out a single-family home property and the considerations and expectations that are attached to such an investment.  

The following forms of Rental Real Estate will and have been covered in this series.

Part 4 – Single-Family Homes.

What Is A Single-Family Home?

You can pretty much picture a single-family home through its description alone.

A single-family home is an independent residential dwelling structure that solely occupies a specified boundary and was not built to share facilities and utilities between more than 1 household.

 A household/family unit is where the occupants of a home are regarded as a single entity. This differs from tenants on a property as tenants are treated as individual entities who share accommodation but pay for the accommodation separately.

Attached properties (cottages and duplexes) and cluster properties (triplexes, quadplexes, and other multiple-unit properties) are at times referred to individually as single-family units when being sold or rented out.

This is only accurate when, in the case of conjoined properties like duplexes or townhouses; the units are separated from their adjacent properties by a ground-to-roof wall.

For other multi-unit complexes like cottages triplexes, quadplexes, and multi-unit properties; this is only true if the units have their separate lot boundary and do not have to share any facilities and utilities as would be the case with properties located in gated communities.  

Single-Family homes – The Basics.

Unlike the other forms of rental real estate, single-family homes are equally viable for renting out, flipping, and accommodation by the landlord.

This makes single-family homes the most versatile property type for ownership as a landlord can conveniently utilize the property for multiple purposes; investment or personal.

This post will focus primarily on the rental potential of single-family homes but that will not dispute the convenience benefit this property form offers.

Management of Single-family homes.

Single-family homes are straight forward with regards to the means and modes of managing tenants on the property.

The landlord is often never too close to the property to the extent that using a property manager is as viable to the landlord as managing the property alone.

This is also additionally benefited by how straight forward 3rd party management of a single-family home is; when compared to other property forms.

For room renting and attached properties; the landlord is often too close to the properties to reap major benefits of property management and for apartments, cluster properties and HMOs; property managers are often stricter about the rules on how they charge for the properties and ensuring proper rules between the tenants, landlord and property managers.

The legality of Single-family homes.    

When you think of renting out a property, most probably the 2 forms of properties that come to mind are apartments and single-family homes and that’s for a good reason. These are the most widely known, accepted, and legalized forms of renting.

And between the 2, the renting of single-family homes is the least restricted and over watched option. this is because the property will not typically house large numbers of people who must have their safety guaranteed on the property.

What To Expect From Single-Family Homes?

When it comes to home renting, the line for tenants over ownership and renting often becomes blurry; that’s not to say that tenants will forget and be able to get away with not paying rent by saying “oops I forgot I didn’t own this place.” It’s because of how attached tenants get attached to single-family homes.

Most tenants of single-family homes are families; who need more space than what smaller properties offer and who are more likely to rent out the location for very long periods. Single-family homes will commonly be rented for multiple years at a time and have very short void periods. This combination leads to tenants growing strong ties and memories with their properties that can lead to specific benefits and disadvantages we will cover below.

Renting a home often requires the most amount of work on the tenants’ behalf concerning managing the property (landscaping and renovations), filling and designing the home (furniture and personal touches), and freedom (hosting, pets, and other amenities).

1. It’s going to be treated like a home for the better.

Tenants are more likely to take personal initiative over making sure the home is homely.

A landlord who gets a good single-family home tenant will likely experience the tenants leaving the homes better than they find them when they leave the property. Taking care of and upgrading landscaping, fixing minor renovations and repairs, requesting more modern and desirable renovations, and generally making sure the home is up to or exceeding a certain standard.

Though it may not seem like it, the fact that single-family-home tenants are more inclined to call you to make specific renovations, upgrades, and repairs to the property that may be immediately costly may also lead to improvements that lead to an overall boost to the value of your property in the market.

2. It’s going to be treated like a home for the worse.

To immediately contradict the above statement, the inevitable fact of tenants in single-family homes seeing the property as their actual home and less than just a rental property is that it’s not all just sunshine and roses.

Single-family home properties will likely need more extensive and regular inspections on the property; especially for tenants who have been staying in the property for a long time.

Landlords of a single-family home like all other rental properties will always hear when something big on the property breaks down but when small things like the kids painting on the walls, broken windows in the garage, and the occasional wine spill on the carpet – it’s a different story.

These things can often be covered by furniture, photos, or just left as they are because they are somewhere most people won’t go to. As such, these things can often go unnoticed and be left to build up for years which can lead to ramifications down the line.

*tenants will inevitably have to pay for all property damage when they move but if this is left to be done at the end – when the current tenants are moving; this can unnecessarily increase the length of void periods as the property needs to be renovated before getting new tenants in.

3. Account for subletting.

This is more apparent when the tenants of the single-family property occupy significantly fewer rooms than the properties allow. Imagine 2 brothers renting out a 4 bedroom single-family home.

Subletting is not necessarily a bad thing but it can be an abused thing if it is approached from a position of unpreparedness. Having a clause in your lease agreement covering subletting is crucial for single-family homes.

To learn more on whether subletting is something you should allow or not and how to implement it; I’ve written an extensive post on the subject(HERE)

4. Separate investment from operations.

Aka “Single-family home landlords should probably use a property manager.”

Single-family homes are a great investment with a multitude of additional operations tagging along with it. Tenants are often more demanding for the quick solution of many large issues and mundane issues such as faulty light bulbs and leaky faucets.

This coupled with rent collection, other repairs, and renovations, and inspections can make managing such a property very time-consuming.

It is often preferable to hire a property manager through an agency to handle these tasks. This immediately leads to more time for the landlord and faster reactions for the tenant but will likely also result in saving money for the landlord as they ensure the property is kept in good condition and tenants’ are held liable quickly for any faults on the property.

5. Reliance on one tenant.

Comparably, the costs of running a vacant single-family home concerning utilities, repairs, and cleaning are the most problematic features for landlords of the property.

For smaller properties like room rentals and attached properties; the costs are significantly fewer and for larger properties like HMOs, apartments, and cluster properties; the costs of having a single or multiple vacant rooms/properties are discounted or completely countered by the tenants of the other rooms/properties.

As such, the landlord is often dependant on their current tenant and the markets’ ability to quickly provide a new tenant should the current tenant leave.

Should You Be In A Single-Family Home?

As rental properties, single-family homes often offer the most distance and freedom for tenants and landlords; as the tenant/household is often the sole occupant of the property. There is no landlord-forced sharing of the property through other tenants, roommates, or sublessees. This is unless the tenant brings them in with permission from the landlord.

Single-family homes often charge comparably high rent per tenant to the other forms of rental forms. This, however, comes at the cost of scalability as only one tenant will be in the property; which makes the landlord partially dependant on that tenant.

What Type Of Landlord Is A Single-Family Home For?

  • You can afford to have a dedicated single-family home to rent out.
  • You have the time and means to manage the needs of a single-family home.
  • You are willing to bring in a property manager to handle the mundane tasks of the property and communicating with the tenant.
  • You are not reliant on the tenant to cover every cost of the property.

What Type Of Tenant Is A Single-Family Home For?

  • Tenants who want more independence away from the landlord and other tenants.
  • Tenants who need more space to accommodate their household (families, friends, and general guests.

Concluding Evaluations On Single-Family Homes.

Single-family homes as rental properties are a noticeable step from room renting and the renting of attached properties as they rely on the landlord being able to finance and dedicate an entire property that they are not able to occupy for a tenant.

This property has the potential to bring in an expected sustainable long-term income from relatively few tenants as tenants of single-family homes will usually have long tenancy periods. This does, however, make the landlord partially dependant on the tenant and even more so in the case where the renting market is not favorable.

Given that the landlord will normally only rent out the property to one household or tenant; the landlord is always more susceptible to large cost incursions if the tenant moves out and the landlord has to go through the entire process of finding, qualifying and managing a new tenant.

Scoring Single Family Homes As An Investment.

As will be the case with all the other rental properties in this series, I will be scoring HMO properties within the following 4 criteria as well as providing brief reasoning for the score:

  • Accessibility – How easy is it to set up and start.
  • Scalability – The ability to increase and handle the increased demand for the service.
  • Return On Investment – How much you get for how much you put in.
  • Return Potential – What can you reasonably expect to get out of this investment.

1. Accessibility (4/5).

Renting out single-family homes is pretty straight forward from the financial, legal, and management perspective of investment; this makes it rather easily accessible for landlords with the funding to finance the investment.

2. Scalability (2/5).

On the individual property, landlords will usually be wholly reliant on the income of an individual tenant/household who, if they were to leave; al the costs of running the property (utilities, repairs, and renovations) would be incurred by the landlord.

As such, the ability of a landlord to scale the income generation of the property on its own is very low when compared to HMOs or attached homes where there the landlord can rent out additional aspects of the property.

3. Return On Investment (3/5).

The inability to scale coupled with the rather high baseline cost of renting out a home; averages out the investment potential of single-family homes concerning ROI.  

4. Return Potential (3/5).

There is very little a landlord of a single-family home can do to directly increase the earning potential of their property without converting it to an HMO of some form.

Single-family homes are good at what they do and do not deviate from the boundaries of their purpose by much.

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I am absolutely in love with learning and sharing all things real estate. I’m an agent for Jacaranda Real Estate In Harare, Zimbabwe. This blog will be the ultimate resource for all things real estate so subscribe and stay tuned.