While regular homeowners may be worrying that the Republican tax plan will raise their monthly costs, investors in single-family rental homes see the proposal as a potential boon to business.



In fact, just the prospect of the plan, which is still being negotiated on Capitol Hill, has more small investors rushing in. Unlike owner-occupants, investors in single-family homes can write off all the expenses of owning and running a rental because the properties are considered a business. The vast majority of individual investors use mortgages on the properties. Fannie Mae and Freddie Mac allow up to 10 investor loans per person.



The interest on those mortgages, along with repair and management costs, are deducted from the income the property produces. Investors are only taxed on that income, so by reducing it, the investment acts as a tax shelter. None of that would change under the Republican tax proposal. The tax plan could, however, drive increased demand for single-family rentals because it will reduce the tax benefits of homeownership. The proposal could eliminate the deduction for property taxes as well as lower the limit on the mortgage interest deduction. That would hit all homeowners who itemize and especially those owners of higher-cost properties in expensive locations. That, in turn, would benefit landlords.

A sign advertising an apartment for rent in front of an apartment building in San Francisco, California. Getty Images

"I think homeowners in those areas, instead of maybe buying up into a different property, will consider investing elsewhere to take advantage of tax shelters available with single-family investing," said Steve Hovland, director of research at California-based HomeUnion, a single-family rental marketplace and management company.



"People that are renting may consider investing into single-family real estate as opposed to owner-occupied real estate just because the tax benefits are so much better." That is just what Finley Miller, a 34-year-old aerospace engineer in Southern California, is doing. He rents the home in which he lives but recently invested in two single-family rental homes in Atlanta. After putting 25 percent down on the mortgages, Miller said he is seeing about a 15 percent return. "It's attractive relative to what I would guess that the stock market or other asset classes would do, and I think that will continue to be the case in the foreseeable future," said Miller, who added that he thinks the tax plan could actually benefit the markets where rental investors are most active. "If it's a competition for businesses to locate in somewhere like Atlanta or Dallas versus somewhere like LA or New York, then maybe it's incrementally more attractive now in those lower-cost areas than it was if this tax plan hadn't gone into effect," Miller said.

A sign advertises an apartment for rent along a row of brownstone townhouses in Brooklyn, New York. Drew Angerer | Getty Images