Which Real Estate Investment Niche Is Right For You?
You may believe it's important to learn and know everything there is about real estate investments, however it's in your best interest to focus on two specific aspects instead. A solid strategy, plan and real estate investment niche will be key to your success as an investor.
Some of the most common types of property, aka "niche", a real estate investor will deal with are:
Raw Land
Raw land is no more than bare land that can be improved upon to increase its value. You can lease and rent land out to create a cash flow. Subdividing the land and selling it off in pieces can also generate profits. Many investors purchase land with the ambition that it will someday become more valuable with future developments like nearby cities expanding or possibly a public freeway or highway being constructed.
Single Family Homes (SFH)
One of the more prevalent real estate investment niche for first time investors are the single-family home. Their simple to rent, easy to sell, and easier to finance. However, in many areas, it may be difficult to acquire a positive cash flow while renting them out.
Duplex/Tri-Plex/Quads (Multi-Family)
Properties with 2-4 seperate units are referred to as "multi-family" properties. These properties blend the conventional financing and purchasing benefits of single family homes. Purchase a multi-family home accordingly and you'll find cash flow can be pretty attainable. Most multi-family property can often have less competition when making offers than single family homes.
One great benefit of a multi-family property is that it can be a strong investment opportunity but can also be a place of personal residence. Additionally another benefit is the ability to secure one mortgage loan and get 2, 3 or even 4 units of rentable dwellings. Last but not least, most banks will look at multi-family properties with four or less units as if they were a SFH. Bank guidelines for single family homes can be much easier to obtain financing of a loan.
Stop looking...
Start Searching!
With our customized Idaho home search you'll find the right home or residential investment property and get the price you want. Customize your search and see homes that come on the market before Zillow, Truila, and other online search site buyers!
The early bird get's the worm!
Small Apartment Complexes
A smaller apartment building can have between 5 and upwards of 50 units. The difference between a small and large apartment complex is not an exact science. However, the average point of difference is commonly 50 units max for small apartments in the investment community. Apartment complexes will be a bit more difficult to obtain financing for compared to the multi-family properties. Lenders will use commercial lending guidelines rather than multi/single family properties.
Small apartment buildings may provided a substantially higher cash flow for investors. One important aspect of them however is providing the means of managing a much larger rental base and common areas of the property. Competition can less considering these property tyes are too small for the larger investment firms to invest in and a bit too large for the novice real estate investor.
Most valuations done on this real estate investment niche are derived from the income they produce and not by comparable properties. A profitable opportunity exists when you add to the property's value by increasing monthly rents, minimizing the expenses and managing the business effectively. Most of these investments tend to have on-site offices or managers who perform maintenance and management duties. Sometimes in exchange for a free rental unit or a discounted rent.
Large Apartment Complexes
These types of large apartment complexes typically include pools, fitness rooms and an on-site full time staff. The price for this kind of real estate investment niche can cost millions of dollars to acquire, and usually require substantial advertising budgets. Large scale apartment complexes can provide stable income with a smaller personal day to day involvement. Many of the large apartment complexes are owned by small groups of investors who pool their resources or REITs (Real Estate Investment Trust companies.
Mobile Homes and Parks
Homes in a defined mobile home park or a manufactured home on it's own land can be acquired for less then traditional homes. Most of the investment strategies that are used in real estate can be applied to mobile homes.
The 6 investment niches displayed here represent just some of the ways you can start your investor career. Try to keep it simple and select just one real estate investment niche to start with and master that niche before dabbling in more varieties. You can always increase your niche as you gain more knowledge and experience with investing.
You can use any real estate investment niche in your investing journey, but you'll need to choose which Real Estate Investment Strategy to go with it.
