How Many Bedrooms Should Your Rental Property Have?
By Kerry Curry, B2R Finance Contributor
Before a real estate investor begins the search for a new residential property to buy, he or she must answer some fundamental questions.
One key question for single-family rental investors is “How many bedrooms should my investment property have?”
In 1990, three-bedroom homes were the most common single-family property type. Three-bedroom homes accounted for 38 percent of the U.S. housing stock, according to the Census Bureau, followed closely by two bedrooms, which made up 31 percent of the housing stock. Only 15 percent of single-family homes in 1990 had four bedrooms. The remainder had one or none.
Oh how the times have changed! House sizes and the number of bedrooms are on the rise while family size is on the decline. Of all the new single-family properties built last year, 47 percent had four bedrooms, according to the Census Bureau.
The average size of the American home has also increased substantially over the past few decades and stands at nearly 2,700 square feet, according to the Census Bureau, up from an average of 1,660 square feet in 1973, the first year that the bureau began tracking housing sizes.
To add to the dynamic, family size has been on the decline, dipping to record low of 2.54 persons per household compared to 3.01 in 1973, according to the bureau.
The trend, at least in the U.S., seems to be toward fewer people occupying more space. It’s a trend that would suggest a strong demand for larger single-family properties. We also should note that there’s a very vibrant, although limited, “tiny house” movement under way in the U.S. with some households opting to live in 400 square feet or less of space.
So what’s a real estate investor to do?
More bedrooms typically translates into higher rents
In general, you’ll be able to charge more for rent for each additional bedroom that you have, but you’ll also want to consider supply and demand in your particular community.
If you are in a college town, for example, large houses with multiple bedrooms within walking distance of the college campus will be in significant demand as students seek to live with their friends while splitting the rent as many ways as possible. We’d note that checking with your lender if you’re considering this type of purchase would be a good idea, as some may have specific constraints on financing student housing.
If you are investing in an empty-nester community, two or three bedrooms may be easier to rent out than four, as retirees downsize their lifestyle and adjust to a fixed income. See our post on accessible rentals for more ideas on what seniors want from their living environments.
The three-bedroom home may still be the sweet spot for many real estate investors as the universe of potential renters should be fairly strong. It won’t feel too big for couples that will enjoy having a spare bedroom to use as a guest room or home office, and it’s still large enough to accommodate families.
B2R Finance offers rental investors innovative lending products to help unlock equity from existing portfolios and provide the cash needed to build rental portfolios nationwide. For more information about how B2R can help you obtain rental property financing, just call 800-227-8107 or visit http://www.b2rfinance.com/apply-now and follow us on Twitter @B2RFinance.
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