Real Estate Investment Property Spotlight: Front-Attached Homes
When you hear about investing in rental properties, images of apartment complexes naturally come to mind. That’s likely the type of place you rented when you first moved out of your parent’s home.
Modern real estate investors are taking a different path, though. Many are investing in properties that look and feel more like traditional houses. And there’s perhaps no style of investment property that matches this image more than front-attached homes.
Learn more to see if this might be the right investment property style for you.
What Do Front-Attached Homes Look Like?
When we talk about front-attached homes, we’re referring to large houses with a front attached garage. Many older homes have a detached garage at the rear, but the front-attached style lets you enter the home through the garage, great for Alberta winters! You still get a lot of space inside, with an open-concept main living area and three or four bedrooms on the second floor. These homes also have a backyard, which can be particularly attractive to tenants.
Many front-attached homes also include a basement suite. Since the property itself can be fairly large, the basement tends to be at least 700 square feet, which is perfect for a separate unit.
Perfect for First-Time Investors
Front-attached homes are one of the best choices for those who are thinking about dipping their toes into the real estate investment waters. First-time investors buy the home for their own family to live in, then they rent out an income suite in the basement.
From there, the investor has some options. Let’s say that the monthly mortgage payment on this property is $1,800, and they can rent out the basement suite for $800 a month. The investor could then use the $800 to reduce their own monthly mortgage payment to just $1,000 a month. The investor could also add the $800 to the mortgage payment, making $2,600 payments each month. The extra $800 goes toward the principal balance, so the investor is building up a lot of equity in the home. If they like real estate investing, they can then easily use the equity as a down payment on the next property.
Two Units in One
Of course, not all investors choose to live in a front-attached property. Many choose this style simply as a way that they can earn two incomes off the same property.
Front-attached homes tend to command a high rental rate. They appeal to families who need a lot of space but who aren’t ready to buy their own home yet for whatever reason. In general, this is a great tenant profile. Families tend to have a stable income, and they tend to rent long-term. And the smaller and more affordable basement suite can appeal to a lot of different types of people, including single professionals or retirees.
The Appeal of Front-Attached Rentals
Front-attached homes have a lot of appeal for renters. They definitely give families the space they need in a variety of ways. Kids can have their own bedrooms, there’s a backyard to safely play in, and there’s space on the main floor to entertain during the holidays.
Families also just like the “feel” of living in a house instead of an apartment building.
Even better, modern front-attached homes tend to be built in thriving communities with features like walking trails, playgrounds, and parks all right there. Your tenants will also be able to easily get to nearby stores for anything they need.
New Construction Over Resale Homes
Buying resale homes can be a great way to save money, but there are often hidden costs involved. You’ll probably have to spend a lot of money to renovate the basement into an income suite. Sometimes, with changes in building codes over the years, it’s not possible to create a legal basement suite in a resale home. You need to carefully do your research if you want to take this route.
New construction homes are a bit more expensive, but there are ways to build them within your budget. Best of all, you don’t have to worry about making repairs, and you’ll be able to attract high-end tenants with the stylish features.
Possible Cash Flow
Of course, you need to make your decision based on how much money you’ll be able to make. This can vary widely depending on how much you spend on the home, what your interest rate looks like, and how much money you can rent out each unit for.
We can look at an example based on some common costs. Let’s say that you purchase the home for $389,900. This includes a finished income suite in the basement. If you have a 2.49%, 25-year mortgage, your monthly payment (including insurance and taxes) is going to be around $1,755. Most likely, you’ll be able to rent the main floor for around $1,400 a month and the basement suite for $800 a month. This scenario would generate a monthly cash flow of $445. That’s a pretty good start!
Front-attached homes can give you a lot of bang for your buck, especially if you build in the right area. Let the experts at Sterling Homes help you get started today.