What are the Profitable Niches and Strategies in Real Estate Investment? – Part 1
Broadly speaking, real estate investments are some of the most profitable. However, to get to the cream of the investments, you have to narrow your investment focus areas to specific niches so that you do not spread yourself thin. There are a lot of things to learn in real estate investment, but if you can master just these two things: a strategy and an investment vehicle then you will have by far succeeded. Choosing An Appropriate Real Estate Investment Niche
Single Family Homes
This is one of the most common investments for first time real estate investors. The advantage with single homes is that they are easy to sell, relatively easier to rent, as well as to finance. However, depending on the area you invest in, the rent you derive from single family rentals may not be sufficient to give you an attractive positive cash flow.
Duplex, Triplex, and Quads
These are basically small multifamily properties consisting of 2 to 4 units. In terms of investment, these properties combine the easy purchasing and financing benefits of a single family unit. If you do proper due diligence at the time of purchasing, this investment can give you a good cashflow. The level of competition in the duplex, triplex, and quads market is not as high and these properties can serve both as a personal residence and a solid investment for the smart investor. The economies of scale in financing the purchase of these investments is evident in that with only a single loan, you can secure up to 4 units.
This investment niche consists of small apartment buildings with units between 5 and 50. It differs from large apartments in that the latter have over 50 units. Once you deep your feet into small apartments investments, you should know that your financing arrangements will be guided more by commercial lending standards instead of residential ones.
If you are up to the challenge and ready to embrace the management intense nature of these properties, then you can reap significant cash flow as the investor. Again, competition is lower for this property thus giving you a bidding advantage.
REIT refers to a real estate investment trust. This is where you pool funds together with other like-minded investors to form a vehicle (REIT) through which you can purchase large real estate investments. Periodically, the REIT will distribute profits to the investors. It is more of a hands-off approach to real estate investment and the rewards are certainly not the same as those of a hands-on investor.
These investments vary significantly in style, size, and purpose. However, they ultimately involve investment in a property leased to a business. It is the choice of the commercial investor to decide whom they shall let the building to, either small local businesses or big box mega stores.
Commercial properties oftentimes provide attractive cash flow, but can also take you through a dry spell during times of vacancies. There has been cases of these properties seating empty for months or even years. Unless your financial position is solid enough, investing in commercial real estate may not be the best path for you as a beginner.
The investment niches outlined above give you an idea of what is out in the real estate market and where you can put your money in. It helps to just pick one or two niches and focus on them with a strategy to expand and bring in more in future. Working with Realty Guru LLC. real estate development professionals can help you have a bright and promising start.