Getting into real estate investing as a beginner requires some out-of-the-box thinking. Buying a rental property using traditional methods and implementing common real estate investment strategies is always worthwhile. However, targeting unusual real estate niches can pay off.
Here is a rundown of the 12 best real estate niches for new investors. We will also highlight some helpful tools Mashvisor offers for those looking into lucrative real estate niches.
Real Estate Niche: Traditional Investment Properties
Our first group of real estate niches for the beginner real estate investor to consider are properties that are typically chosen as investments. Condos, duplexes, and residential multifamily homes are the types investors normally search for. Each offers different advantages and few disadvantages.
Owner-Occupied Multi-Unit Properties
One interesting subset of the traditional group of niches in real estate is an owner-occupied multifamily unit. This is a type of arrangement that many new real estate investors look to. The primary reason is that it offers an attractive financing method for those with little money of their own to invest. Low-interest loans are possible in this arrangement. Also, as the property increases in value, a cash-out refinancing may offer an investor a way to pull money out for other purchases. By establishing a rent roll in the rental part of the property, a lender can now offer to finance a second property.
Condos & Townhouses
Townhouses and condos are common types of real estate niches that new investors turn to. Condos offer lower overhead than single-family homes. In addition, these properties come with included services and a homeowners’ association to help manage the property. Condos and townhouses are also popular with renters.
Duplex homes are excellent first real estate investments, but only if one owns the whole property (both halves). Like condos, shared walls and shared grounds mean that overhead is lower. Maintenance is easier in many ways and renters view duplex homes as having some of the advantages of a single-family home.
Related: Townhouse vs. Duplex: Which Is the Better Real Estate Investment?
Residential Multifamily Homes
Multifamily homes are very much like small apartment buildings. With just one roof, and shared grounds, they have the same benefits of duplex homes and single condos, but with three or more units, they are a mini-business of their own. Multifamily homes are highly prized by investors and new investors should have this type of rental property at the top of their wish list.
Real Estate Niche: Non-Traditional Investment Properties
Single-family homes are often overlooked by new investors. There are challenges, but some single-family homes can rent well, particularly if they fit into another niche, like a traditional rental property, a luxury home, or an Airbnb rental. Investors would be wise to take a careful look at the metrics, but it is possible to turn a profit on a single-family home for rent.
One big upside to the vacation rental property investment is that an investor can use it for their own vacations with family and friends. This is a type of property that many first-time investors use to get their feet wet and learn the ropes.
Related: Buying a Vacation Rental Property for the First Time? Here’s How
Senior housing is a real estate niche that cannot be overlooked, but that should be approached with caution. It is not uncommon for senior housing to have a long list of restrictions related to renting. Still, in the right circumstances, a senior housing unit can be a smart investment. This is one real estate niche poised for growth.
Luxury Real Estate
Luxury real estate can be a big money maker if one knows the ins and outs of how to maximize rental occupancy. Either as a long-term or Airbnb-type of rental, luxury real estate will cost more to buy into, but the rewards are also large. Mashvisor has a step by step guide to breaking into luxury real estate investing you may find helpful.
Student housing is one of the real estate niches that typically stands apart from traditional rentals. It is illegal to only rent to one type of tenant in the U.S. However, in college towns, it is a common practice and can be done within the bounds of the law. Student housing comes with its own challenges, but can be a reliable source of income since parents with good credit typically co-sign the rental agreements or leases. There is a lucrative real estate niche for those willing to learn the ropes.
Related: The Guide to Renting Out to College Students
Real Estate Niches: Non-Traditional Sales
One attractive type of real estate niches for those with an open timeline is an untraditional sale of a type of property. A short sale is a sale in which the current owner owes more than the property is worth to one or more lenders. The investor makes an offer to the bank and the private owner, usually through a real estate broker. These deals take more time to close than traditional purchases. The upside is that banks are often willing to accept below market value for the properties, which in many cases, are unoccupied. The patient investor will find deals here. Given the added complexity of this type of investment, plan to use a real estate lawyer familiar with short sales. The goal in this type of investment is to start off with a property that already has easy-to-access equity.
Foreclosures and Auctions
Among the popular real estate niches for bargain hunters, foreclosures and auctions are their own mini-industry. Purchasing a foreclosed property has considerable challenges, but the upside is a below-market purchase. A new investor who has the ability to do renovations and repairs at an affordable price will make money here. Foreclosures sold at real estate auctions need major work, so plan ahead. This type of investment property requires some up-front sweat equity and always needs some capital input.
Related: What Is a Foreclosure? How Can You Invest in One?
Off Market Properties
Properties that have not yet been listed for sale, or have been taken off the market for lack of buyer interest or other reasons can be great real estate investments. Networking is key here. You need to have your network humming to even learn about these possibilities. After all, the owner isn’t selling – yet. Off market properties can often be purchased without a listing agent. That eliminates the commission and leaves some room for a deal.
Mashvisor can help you find rental property investments in any of the above real estate niches whether it’s a traditional multifamily home or even an off market property! To begin searching for great rental property opportunities in your neighborhood, click here to get started.