Yield on Investment in Single-family Homes Unknown

Single-family home real estate investment trusts (REITs) are a new player in the real estate market, with the outcome yet to be realized. One of them, Silver Bay Realty Trust says there are 41 million rental units in the U. S., equal to 30 percent of the housing market. Roughly 25 million are apartment units, nearly 14 million are single-family home rentals, and another two million are manufactured homes. The single-family homes, often bought out of foreclosure, generally need repairs, which will forestall return on the investment, especially when combined with property taxes. If renovations cost around $10,000 and the unit rents for $1,150 a month, the repairs and taxes will eat up the first years’ rent, according to dailyfinance.com. At the low end, it is estimated nine percent of revenues will go towards costs, and that number will likely be higher in some cases. Comparatively, manufactured home community owner Sun Communities, Inc. (SUI) estimates it spends only 3.5 percent of revenues for ongoing maintenance because homeowners are responsible for the up keep of their homes. While apartment buildings may need an entire roof, single-family home REIT properties are generally scattered about and not connected, ruling out the buying of anything in bulk as a means to save money. As MHProNews knows, Sun owns and operates 185 communities with over 67,000 home sites.

(Image credit: housingwire)

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