Single-Family Rentals: A Promising Investment Alternative for 2023 and Beyond

Published on
July 24, 2023
Single-Family Rentals: A Promising Investment Alternative

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In an era of financial uncertainty and market volatility, the diversification of investment portfolios has become more critical than ever. One sector that continues to offer promising returns, despite economic fluctuations, is real estate, particularly single-family rentals (SFRs). [2] This article aims to provide a comprehensive guide to understanding the potential of SFRs as a robust investment alternative to traditional stocks and bonds.

The Current State of the Housing Market

As we move further into 2023, the housing market presents a mixed bag of conditions. According to a recent report by Forbes, the national average 30-year fixed mortgage rate has seen some fluctuations, currently sitting at 6.96% as of mid-July[1]. Existing home sales have remained relatively flat, with a slight rise of 0.2% in May, as reported by the National Association of Realtors (NAR)[1]. The median existing-home sales price has seen a slight decrease year-over-year for the fourth consecutive month, which could be a promising sign for potential homebuyers. However, experts do not anticipate substantial nationwide price declines in the near future[1].

Single-Family Rentals: A Strong Investment Alternative

Over the past quarter-century, the returns from single-family rentals (SFRs) have been strikingly similar to those from stocks, and they have outperformed bonds[3]. However, the key difference lies in their volatility or the degree of variation in their returns. SFRs have shown far less volatility compared to stocks and bonds, making them a more stable investment option[3]

Data from Roofstock, a leading player in the SFR market, reveals that the average annual returns in the single-family rental market are on par with those of the stock market and surpass those of bonds, but with significantly less volatility[3].

To put this into perspective, let's consider a 25-year span from 1992 to 2017. During this period, the S&P 500 stocks had a high point where they posted average annual returns exceeding 35 percent. However, they also had a low point where returns plummeted equally. 

In contrast, single-family rental investments had a high point of 17.5 percent returns and a low point of just a 2.5 percent decline[3].

The Reward/Risk Ratio is a metric that measures the efficiency of an investment. It shows how much return you get for a certain level of risk, as measured by volatility. The higher the ratio, the more efficient the investment is from a risk/return standpoint. SFRs have historically offered more attractive risk-adjusted returns than the S&P 500 and bonds, making them a more efficient investment option using this metric[3].

The Future of Single-Family Rentals

Given the current market conditions and the historical performance of SFRs, it's reasonable to expect that single-family rentals could continue to outperform the S&P 500 in 2023 and beyond. The ongoing housing affordability crisis, coupled with high mortgage rates and constrained housing inventory, has led to a surge in rental demand. This trend is likely to continue, given the economic uncertainty and the challenges faced by many aspiring homeowners.

Investing in single-family rentals has the potential for a steady income stream, property appreciation, and diversification of your investment portfolio. It's also worth noting that rental demand tends to remain strong even during economic downturns, as people always need a place to live.

Who Should Consider Investing in Single-Family Rentals?

Investing in single-family rentals could be a good fit for a wide range of investors. Whether you're a seasoned investor looking to diversify your portfolio or a new investor seeking a stable income stream, SFRs can offer a compelling investment opportunity.

Here are a few types of investors who might find SFRs particularly attractive:

1. Investors seeking stable returns: Given their lower volatility compared to stocks and bonds, SFRs have the ability to provide a more predictable and stable return on investment.

2. Investors looking for passive income: Once you've purchased a rental property and found reliable tenants, SFRs can provide a steady stream of passive rental income.

3. Investors interested in diversification: Adding real estate to your portfolio can help diversify your investments and reduce risk[^3^].

4. Investors looking for tax advantages: Real estate investors can take advantage of various tax deductions, including mortgage interest, property taxes, operating expenses, depreciation, and repairs.


In conclusion, while the housing market faces challenges, it also presents opportunities. Single-family rentals, in particular, have shown promising potential as a robust investment alternative to traditional stocks and bonds. With their historical performance, lower volatility, and current market conditions, SFRs could continue to outperform the S&P 500 on a risk-adjusted basis in 2023 and beyond, making them a compelling investment option for a wide range of investors [^3^].

[1]: [Forbes](

[2] [Financial Samurai] 

[3]: [Roofstock](


This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security which can only be made through official documents such as a private placement memorandum or a prospectus. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Neither Concreit nor any of its affiliates provides tax advice or investment recommendations and do not represent in any manner that the outcomes described herein or on the Site will result in any particular investment or tax consequence.Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Concreit does not guarantee its accuracy.

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