Real estate investment is not limited to residential buildings such as condominiums and apartments, but can be started with detached properties or single family homes, which is a good choice for real estate beginners.
This section introduces the advantages and disadvantages of investing in single-family homes, and explains why it is said that these types of investments are easy even for first time investors.
If you want to start investing in real estate, but can't take the first step, please use this article as a guide.

The merits of investing in Single Family Homes

Single family home real estate investment is an investment method in which a detached house is rented out to people to earn rental income.

The following is an explanation of the advantages of investing in detached single family houses.

Merit ①: you can start with less capital than other investments

Single-family real estate investment can be started with less funds compared to real estate investments in condominiums and apartments.
Newly built properties require tens of millions of yen, but used (previously owned) properties can be purchased and renovated with only a few million yen.
Therefore, investing in single family homes is suitable for those who want to try out real estate investment for the first time to see what it is like.
This has the advantage of reducing the risk of investing large amounts of money.

Merit ② Occupancy periods are longer

Single family detached houses are in demand from families, and families tend to live in the same properties for relatively long periods due to the educational environment for children and other reasons.
Another reason is that while there are many options for apartment and condominium rentals, the supply of single family home rentals is relatively small, making it difficult to find other alternatives.
Not moving out is a big advantage because there is no risk of vacancy.

Merit ③Many properties have high yields

For single-family real estate investments, management association expenses and repair reserves are not incurred like condominiums and apartments, so fixed costs are low.
If property prices can be kept down, high yields can be expected.
Apartments require major repairs every 10 to 20 years, while single-family properties tend to have relatively fewer repairs.
Timely repairs can reduce costs and provide stable profits.

Merit ④ Asset value is unlikely to decline

The breakdown of the property price of a detached house is mostly the land portion, so it has the advantage of not decreasing in asset value.
The asset value of buildings declines due to aging, but the land portion continues to have a certain asset value.
Single-family home real estate investments can be expected to generate long-term income, as well as having the benefit of retaining part of their value.

The demerits of investing in Single Family Homes

Next, we explain the disadvantages of single-family real estate investment item by item.

Demerit ① Occupancy conditions significantly affect profits

In the case of real estate investment in a condominium or a whole apartment building, even if a vacancy occurs, it can be covered by rental income from other rooms.
But in the case of a house investment, there is no income unless there is a tenant.
If you buy a property with a loan, you will have to keep making monthly repayments, so you need to take measures to avoid vacancies and plan your finances for periods when you will not receive rental income.
As it takes time to find another tenant after a property becomes vacant, we recommend communicating with the tenant on a regular basis.
You should pay attention to whether the tenants are satisfied with the property and whether they plan to move out.
In case they are planning to move out, you should start looking for the next tenant in a timely manner.

Demerit ② Difficult to pass investment loan screening

When purchasing a property with a loan, money cannot be borrowed from the financial institution unless the loan is approved.
Used houses often have a short useful life of the building, which may result in a lower asset valuation value depending on the financial institution.
Keep in mind that the legal useful life varies depending on the structure of the property.
●Lightweight steel frame construction 19 years
●Wooden: 22 years
●Steel frame structure 34 years
●Reinforced concrete construction 47 years

If you are unable to obtain a loan from a private financial institution, consider using the Japan Finance Corporation, a government-affiliated financial institution.
Alternatively, it is a good idea to have a good amount of personal funds.

Demerit ③ Repair costs may be high

Investing in detached houses has a risk of costly repairs because there are many areas that require maintenance, such as the interior, facilities, exterior and roof.
It also costs a lot of money to repair damage to the basic structure of a building, such as damage caused by disasters, termite damage, and rain leaks.
Therefore, it is important to check the condition of the building on a regular basis and fix any problems in the early stages.
It is a good idea to carefully determine if the building structure is sound at the time of purchase.

Demerit ④ Less income 

Unless you own multiple units, it will be difficult to earn a lot of rental income.
Setting high rents is unrealistic because many people would just buy their own properties if the rents are too high.
Therefore, you may feel that owning one house is not profitable enough for the effort it takes.
Think of it as an investment model where you can increase your assets over the long term with a small amount of money.

Reasons why beginner investors are more likely to succeed by investing in Single Family Homes

It is said that investing in detached houses is easy for beginners to succeed due to its many advantages.
Here is an explanation of the reasons why.

Reason ① Many Options for an Exit Strategy

The secret to success is to plan an exit strategy, such as selling the property or inheriting it, at the beginning of the investment process.
After operating a detached property, there are many options, such as "sell it," "live in it," "inherit it," or if the building is deteriorating badly, "clear it and sell it," or "build a new property and operate it.
Even if you plan to continue managing real estate for a long time, it is a good idea to have an exit strategy in place, taking into consideration the possibility that you may have to let go of the property due to unexpected events.
Also, after the property has deteriorated and its asset value has become low, your exit strategy will be limited.
Once you have recovered the initial cost of purchase and renovation through rental income, you can sell the property when it still has some asset value.
From among the various exit strategies, choose the method that best suits your age and life plan to get started.

Reason ② Less affected by location

Compared to condominium investing, detached house investing is less affected by location and covers a wider range of properties, making it easier for beginners to succeed with less confusion in selecting properties.
If it is for a family who owns a car, you will be able to find tenants even in the suburbs.
For example, a family with small children may be looking for a detached house to rent in the suburbs and their criteria may involve avoiding noise and having a good child-rearing environment.
It is an advantage for real estate beginners to be able to easily find a property without having to aim for a property near a station with a high competition rate.

Reason ③ Reduce Repair Expenses through DIY Renovations

As a way to reduce expenditures that squeeze profits, it is recommended to do DIY renovations where possible to reduce repair costs.
For areas that require specialized knowledge, such as water and exterior walls, it is necessary to ask a contractor, but it is possible to try DIY remodeling to the extent that you can, such as interior wallpaper.
Easy-to-apply wallpaper and DIY kits are available at home centers and online stores, so even beginners can handle them easily.
With simple DIY, even beginners can reduce the cost of real estate investment.

In Conclusion

In this article we talked about the advantages and disadvantages of knowing how to start investing in single family home (or detached house) real estate.
Beginners in particular may feel uneasy about the high cost of investment, but detached property investing is said to be an investment plan that is easy to succeed in and can provide long and stable profits.
Please consider detached properties for your first real estate investment.