Why I Prefer 2 Bedroom For Residential Rentals

[Michael Henry]

Why do I like two bedroom ranches vs 3 bedroom on the residential side (over any other style) for long term rentals: A 2 bedroom and 1 bath ranch that is under 1,000 sq ft will usually be located in residential neighborhoods without many rentals. The size of these properties are small so they are less desirable by rehabbers and traditional first time home buyers. This in turn makes these types of properties very inexpensive to purchase. The rent-ability of the unit does not change much but based upon the size of the property it would potentially reduce necessity for third party management. Most areas in Milwaukee will demand a rent amount of $750 or above however I would think $825 would be pushing it. These properties routinely single mothers and small families with one or two children.

All things being equal, these tenants frequently stay in the property 2­-3 years longer than other property types. Fixing the property up is very inexpensive because of the size and even turning the unit around for new tenants is oftentimes less costly. This is due to less wear and tear on the property. The drawbacks are twofold; the sale of the property and appreciation of the property. The same reason why you were able to buy that property cheap is the same reason why it will be hard to sell. I think you would be able to sale those types of properties eventually but the time on the market will probably be longer than other property types. One solution would be to make a commercial product; assuming you purchased more than one, by marketing them as package deal many more investors will be interested given the higher dollar amount and cash flow.

BP what have your experiences been with 2 bedroom houses?

(Keep in mind I am in the Midwest primarily Milwaukee, WI and surrounding areas)