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53 "There are three primary things that we look for in an investor when making loans: an investor's experience, assets, and credit." —Josh Craig, Chief Revenue Officer, Lima One Capital Tesch said. ere is some movement out to rural areas too, Offutt added. However, the rural areas need to have high-speed internet connections. "e biggest concern that capital has with rural areas is the lack of comparables for appraisals." e top considerations among potential tenants are properties that are in good neighborhoods with good school districts, experts agree. As for the properties themselves, tenants and SFR buyers want homes with at least three bedrooms and two full bathrooms, according to experts. A fenced yard is another desirable option. While a house with a pool can command higher rent, it also has too much added liability and upkeep, experts agreed. "With our company, we're seeing increased demand for a renewed floor plan, with a closed-off kitchen and improved soundproofing," Craig said. ere is some demand for quiet office space, because many both within and outside of the SFR space expect the work-from-home trend that spiked during the height of the pandemic to continue. Homeworkers have proven to be more productive, according to many studies, and fewer workers in the office means companies can downsize expensive commercial spaces. Good internet connectivity is at more of a premium than ever before. Renters and SFR owners also prefer countertops, floors, etc., that are easy to clean rather than higher-end surfaces that might be harder to maintain. Renters and landlords alike prefer properties with easy access to parks, trails, and other outdoor amenities, Craig said. THE BUILD-FOR-RENT FACTOR "Build-for-rent is really continuing to take off," Cline said. Builders see a promising market due to the attractiveness of SFRs compared to multifamily and the challenges involved with homeownership. "ese are purposely built communities to be rentals long-term," Cline said. "Most are designed to be mid-to-lower priced so they can be affordable. ey'll have slightly smaller square footage and slightly less interior finish (i.e., good, but not top-of-the line appliances, etc.) than a retail for-sale home." SFRs typically should return about 1% per month over expenses, many experts agreed. However, Tesch said that while that rate might be achievable for those who bought properties a few years ago, the acquisition cost has risen to the point that an 8–10% return is more realistic. Some investors will accept a lower cash flow in exchange for better appreciation, Craig said. "A lot of investors are looking at a 20- to 30-year plan. ey can buy properties as a college savings plan for their children. You have positive cash flow, and you have a third party paying down your balance. You have good yields and tax advantages. Build-for-rent homes may achieve a 25% to 35% internal rate of return (IRR) in many markets," Cline said. Other SFR owners will invest in the properties for the option of renting or selling, depending on market conditions. If real estate prices are depressed, rental could offer the best return, but if prices appreciate sharply, then the best option may be to sell some properties, then purchase others when the market cools off again. Depending on the property, rents can range anywhere from $1,400–$2,000 per month. Experts caution that charging higher rents will provide better returns but will also reduce the potential tenant base. If the rent is too high, the owner risks the property being vacant for an extended period. Accessory Dwelling Units (ADUs) are gaining in popularity as homeowners with extra land look to maximize their rental income, said Seth Phillips, President of ADU Gold. ADUs are dwellings like carriage houses, "granny flats," or other separate dwelling units built on a property that already has a home in place. ey are popular in areas where the cost of land is prohibitive, Phillips said. ey can enable the owner to greatly increase ROI because they're building on "free" land, Phillips added. While rental income is the most popular goal, "it's also a perfect opportunity for a family [different generations] living together with each having their own private space." However, only about two-thirds of states have approved ADUs.