Focusing your investment property strategy on a particular clientele often translates into success in the industry. When you invest money within your niche market, you are able to outperform your competition and secure better deals as you can target your audience more efficiently and identify pain points to minimize your risks. In addition to financial incentives that come with finding a niche, because you are operating in a more focused segment, the relationship between your brand and your customers becomes stronger, which is a key component to customer retention.
The most common way to specialize in real estate investing is by property type. Some popular investment property types include single-family, duplex/triplex, condos, raw land, commercial, REITs, and large apartment buildings. Let us delve a bit deeper into each category.
A single-family is an independent residential unit that sits on its own land. One of the benefits of this investment property type is that supply is plentiful, and market is vibrant as the vast majority of Americans would prefer to live in a detached, single-family home. From a landlord’s standpoint, it is worth noting that maintenance and repair costs are typically higher than, say, a condo.
Duplexes and triplexes are similar to houses in that they occupy their own land. But like apartment buildings, these investment properties generate higher rental income with lower relative expenses. Another great benefit is access to an array of lending products with favorable terms. If you are buying a multi-family investment property, you can qualify for a FHA loan, which allows for lower interest rate and down payment as low as 3.5%. Additionally, these loans are typically more forgiving when it comes to credit scores.
Condos are individually owned units that are part of a multi-unit complex. The allure of this type of investment property lies in more affordable purchase prices and fewer repair and maintenance expenses. Monthly HOA fees, however, can eat into your profits so it is important to budget for these when deciding to buy a condo. Furthermore, if your goal is the appreciation potential, keep in mind that single-family homes tend to appreciate more than condos.
Raw land is an investment property in its most natural state, with no improvements or infrastructure. While the niche for raw land is smaller, there are a number of considerations that need to be addressed when purchasing raw land. Make sure you have a plan for the intended use of the parcel, whether it is building a home, farming, running livestock, or diversifying your portfolio.
A commercial investment property includes but is not limited to office buildings, retail space for lease, and warehouses. Because commercial properties come in all shapes and forms and serve various purposes, it is essential to do your due diligence about the subniches within this niche. Unlike residential loans, the terms of commercial loans typically range from 5 to 20 years.
A real estate investment trust (REIT) is a publicly traded entity that owns, operates, or finances income-generating real estate. REITs generate steady income stream for investors but offer little in the way of capital appreciation.
Large Apartment Building
Apartment buildings are defined as those containing 100 or more units. With more residences for rent, you have more economy of scale and are able to spread costs over multiple income streams, thereby reducing your risk exposure. The price points, however, are higher and oftentimes require a combination of commercial loans and higher down payments.
Are you looking to invest in a specific niche? RLG has the tools and resources at its disposal to get you on your way to purchasing the right investment property for you. Call us today to learn more and experience firsthand the dedicated, personalized customer service, and undivided attention that RLG has to offer!