There’s nothing wrong with single family homes as a starter real estate investment if that’s all you can afford in your area. The biggest drawback is that if it’s vacant you have 100% vacancy which can be a tremendous drain on your financial resources. The biggest benefit is that it’s likely to appreciate faster than other investment property because there are more potential buyers for them since there are more home buyers than investment property purchasers (law of supply and demand). In addition, you get all of the tax benefits of buying investment property.

When you are financially capable, you may want to consider buying more traditional investment property to diversify your portfolio like four plexes or larger properties. When one unit in a four plex is vacant you only have a 25% vacancy rate lowering your risk.

However, there is a growing rent control movement across the country so you’ll want to keep an eye on your local, state and national laws because they will negatively affect your ability to raise rents as you see fit and make multi-unit properties less-attractive to future purchasers. In most areas, single-family homes that are rented out are still exempt from these laws.