No other home type says Americana as much as the 3:2 home, called that, probably by your real estate agent, because it has three bedrooms and two bathrooms. For years, the National Association of Realtors (NAR) trends report has shown the 3:2 home to be the most popular. For 2020, for example, the typical home purchased in America had square footage coming in at 1,850 square feet, three bedrooms, and two bathrooms and was built in 1990. The numbers show the 3:2 home is popular, and a popular product usually makes a good real estate investment.
Is a 3:2 good investment property?
Because 3:2 is a home type most people are familiar with -- and like -- it's a good choice for a property investor. It's a proven product, meaning there should be a good market for both selling and renting a 3:2 home, making it a good property investment.
Although a real estate investor can buy a one- or two-bedroom home as an investment property, a 3:2 would probably be a better investment, particularly for a rental property. A one- or two-bedroom home will be competing with multifamily property, like apartment complexes, many of which have upscale amenities. Plus, with a one- or two-bedroom home, renters are usually shorter-term ones.
A three-bedroom home typically skews for another market: people who want more room and different features than an apartment can offer, such as outdoor space (good for kids, dogs, and cookouts). Because a 3:2 has enough bedrooms to accommodate a family, once a family moves in, there's a greater chance they'll stay longer than single people would, especially if the renters have children enrolled in school.
How a 3:2 compares with a 4:2
With investment property, the goal is to make as much money as possible. If your property will be a rental, you might have more cash flow but not make as much rental income overall with a four-bedroom home as you would with a three-bedroom home.
For one, the purchase price is usually more with a four-bedroom home. If you plan to flip, it could take longer to sell a more expensive property. For another, the extra bedroom -- although having one can usually fetch a higher rent price -- allows more people in the house, and that usually means more wear and tear, translating into more expenses for you. If you can't get significantly more rent for a 4:2 than you could a 3:2, the 3:2 would likely be the better investment.
How a 3:2 compares with a 3:1
The number of bathrooms a home has determines how popular it will be, And that determines how much you can sell a home for and how easy (or difficult) it will be to rent. The NAR trends report shows that 18% of people bought a one-bathroom home in 2020, but 61% bought a two-bathroom home -- a huge divide.
Having only one bathroom can be a hard sell for buyers and renters. If the house has 1.5 bathrooms though, meaning one full bathroom with a bathtub and/or shower and a second bathroom with no shower or tub, it's more desirable than a one-bathroom home. After you run the numbers, determine whether you'll reach your goals with a 3:1 home.
If you're convinced that a 3:2 home is the right type of investment property for you, you might also want to consider the type of renter you wish to market to. This floor plan is more desirable to some groups than others.
If your 3:2 is two stories, a master on the main floor is popular with older renters, but young families that have or are planning to start a family prefer the bedrooms to be on the same level.
If you're considering a 3:2 ranch house, it's most desirable if the bedrooms don't share a wall (for privacy reasons) and instead are separated by a hallway or bathroom. Also, look for a master bedroom on the rear of the house where it's quieter and away from the street.
The Millionacres bottom line
The 3:2 home is a perennial favorite for real estate investing for both people who will use the home as their primary residence and investors who wish to quickly sell a flip or want to hold onto the house and use it as a rental property. The trick in today's market is finding a good deal on one because at the time of this writing, in this real estate market, those homes are selling like hotcakes.