Are there any reasons why single-family rentals are a bad idea? I've
had Realtors tell me that it is harder to find good tenants for single
families, but it has not been clear why.
I don't think single-family rentals are a bad idea in general, but they can present different challenges. Single-family homes often have yards that aren't maintained by an HOA, so that falls to the tenant, you, or a lawn service. When left to the tenant it can get ugly, this is a bigger issue for distant landlords that don't keep an eye on things.
House size and location can also make a difference, a smaller 1-3 bedroom in a large city will be pretty easy to find tenants for, while a 4-5 bedroom in the suburbs will likely have a smaller pool of applicants. The historic trend has been for people to want more space for a family as they get older, and as people get older they are more likely to have the financial stability needed to buy a home, so people under 35 are more likely to be renting than other groups. However, currently the percentage of suburban rentals in many large cities is growing faster than percentage of urban rentals (source), and it seems like there's an increasing number of people who don't desire to own a home. In most suburbs that means greater demand for single-family rentals.
Be aware that there are laws in some areas that prevent more than a certain number of unrelated people from living together (popular in college towns), which can limit the tenant pool for a larger house.
I'm sure there are other factors and preferences, but if you study your market you should be able to find out what kind of single-family houses make good rentals and which might not. There seems to be plenty of people who can't or don't want to own a home but want a yard for a dog or kids, so I don't think there's a strong argument against single-family houses as a whole.
