Decoding the Dilemma: Single Family Homes vs Note Investing
Single family homes or note investing? Both investments have their merits, but the decision ultimately hinges on individual preferences, risk tolerance, and the desired level of involvement in the investment. Let’s dissect the pros and cons to help you make an informed choice.
The Landlord’s Burden:
Investing in a single family home usually means wearing the landlord hat. While property ownership can be rewarding, the responsibilities can be demanding. As the landlord, you become the go-to person for every maintenance issue – from a backed-up toilet to a need for a new roof. The constant demand for attention can be both time-consuming and stressful.
The Passive Paradise of Note Investing:
Contrast this with the realm of note investing, particularly in a note fund. In this scenario, you won’t receive any calls about property issues. As the bank, you don’t get the call for a broken toilet or aging shingles. Instead, a team of seasoned experts takes charge of managing the investment on your behalf. The beauty lies in the simplicity – you get to relax while professionals handle the day-to-day intricacies.
The Cash Flow Conundrum:
In the single family home arena, cash flow is directly related to the occupancy status. If a tenant moves out, you suddenly find yourself with zero cash flow until a new renter is secured. This dependence on occupancy creates a level of uncertainty and urgency in maintaining consistent income. Even when it is occupied you need to be setting aside a portion of the income to go towards future maintenance and repairs, resulting in a lower return.
Note Fund Resilience:
Enter the note fund with its diversified portfolio of paying mortgages. Even if one or two notes were to default, the impact on your investment isn’t affected. The fund as a whole continues to generate good cash flow, providing a buffer against the occasional hiccup. This resilience ensures a more stable income stream compared to the unpredictability of single family home rentals.
Passive Prosperity:
The appeal of note fund investing lies in enjoying all the financial benefits without the hassles associated with property ownership. Whether actively managing single family homes or passively investing in a fund, the financial rewards can be comparable. The key distinction is the level of involvement and the peace of mind that comes with note investing.
So What’s Best?:
In the debate of single family homes versus note investing, the answer lies in personal preferences and investment goals. While single family homes offer tangible ownership, note investing in a fund provides a more hands-off, yet equally lucrative, approach. As you navigate this decision-making process, consider your desired level of involvement, risk tolerance, and the financial goals that align with your investment strategy. Whether it’s being a hands-on landlord or enjoying the benefits of a hands-off note fund, the choice is yours. If you are considering investing in real estate notes but unsure how to get started, book a consultation with Nathan Turner, the founder of Earnest Investing today: Speak to Nathan or call 312-860-3747 to get started.
