We all know if real estate investing is done correctly that it can be your ticket to a guaranteed future. What’s even more guaranteed and makes big bucks is finding your niche in real estate investing. Just think about all the specialized professionals who make the most money like medical surgeons, dentists, technicians, engineers, and contractors. Real estate investing niches work the same way. The more you specialize in niches, the better you do financially. The question is how can you find your niche in real estate investing? Let’s find out!
Where Can You Find Your Real Estate Niche?
The first thing you want to do is investigate and explore which real estate niche is right for you. Uncover the many approaches to real estate investing and pinpoint what interests you most. Ask yourself “Which niche defines who I am as a person?” Are you into first-time home buyers or dealing with rental properties? Maybe you prefer wholesaling over flipping homes. Whichever niche you decide to embark upon always remember that it should reflect you as a real estate investor. Let’s quickly discuss each field before moving onto the next strategy that will help you find your niche in real estate investing.
First-time home buyers
If you are an excellent communicator and love the people part of the business, you may want to cater to first-time homebuyers. First-time buyers are, on average, more excited than others to begin the process of house hunting. The most obvious way to specialize in real estate investing is by property type. Below are the most popular types of investment property.
- Single family homes: Single family homes exist on their own lot, and builders construct them on site. Because this type of investment property is so plentiful and popular, it is still one of the best real estate investing niches. Certain high-priced markets may not work financially for house rentals. But don’t assume that’s always the case. Look hard in working-class neighborhoods, and go to less trendy neighborhoods just outside of the popular areas. The prices are usually more affordable there.
- Small apartment buildings: Definitions differ for this niche, but it’s typically between 5-100 units. These buildings are usually too small for the big national apartment investors to mess with. But they are too big for the small, mom-and-pop type of investors. So, they represent a very interesting niche for investors willing to pursue them. Financing for these typically comes from commercial lenders, like local banks.
- Large apartment buildings: Large apartment buildings, which we’ll define as any building over 100 units, have many advantages. The larger a building, the more economies of scale exist. This means you have income from many units to pay for one roof, one parking lot, one property manager, one maintenance contractor, etc. You also have the benefit of multiplied cash flow from many units. Because the price points are higher, real estate investors typically finance these investment properties with a combination of commercial loans and capital from partnerships.
- REITs (Real Estate Investment Trusts): REITs are publicly traded entities very much like stock mutual funds. They own a larger, more diverse basket of investment properties in one or more of the property niches above. Many real estate investors who want more liquid, passive and diversified real estate investments choose this niche.
Instead of specializing in a certain type of investment property, you could also choose a niche based on the source of your property purchase – the seller. Seller niches represent situations in life that cause people to want to sell such as:
- Preforeclosures: In real estate investing when property owners fall behind on their mortgage payments, eventually the lender begins legal action to take back the property. The period between the payments falling behind and the actual foreclosure auction is called preforeclosure. This is a potentially profitable niche because typically the property owner is motivated to sell rather than face the hassle, risk, and embarrassment of a foreclosure.
- Bank Owned/REO: This niche includes the investment properties owned by banks after a foreclosure auction. REO stands for “real estate owned,” the name for the section of a bank’s balance sheet where these properties are listed. Typically banks make money from interest on loans and not from real estate. So, they will often list the properties at more aggressive prices to sell them quickly. Although there are always bank owned properties, the strength of the niche is repeated depending on how many properties banks have on record.
- Estates/Probate: People are born, and people die. That’s a fact of life. Another fact of life is that some people who die own real estate, and the heirs must decide what to do with it. Very often, the heirs decide to liquidate the property instead of keeping it. This presents an opportunity for real estate investors because the heirs may be long distance and the investment property may need work in order to maximize its value. Offering the service of purchasing real estate from heirs can be a very profitable niche.
Ways to Find Your Niche in Real Estate Investing
So, we talked about the different niches and where to find them. Let’s now talk about how to find your niche in real estate investing.
- Work only with a certain type of property. As mentioned previously, there is a wide variety of real estate investment properties to choose from. Pick one that best suits you as a real estate investor and go for it!
- Specialize in one geographical area. If you have very large subdivisions in your area, specializing in one subdivision has been found to be very lucrative for some real estate investors.
- Work only with one type of client. Know what type of property you want to specialize in and which geographic area and pinpoint the exact type of people you are targeting so you can know where to invest money.
Keep in mind that in real estate investing there are so many directions to take in today’s real estate industry and the only way to realize success is by establishing yourself as a pro in your specific market. If you can come up with a unique or systematic way to find deals make it your mission to be known. Keep your real estate niche broad enough so that you have a steady stream of business, but narrow enough so that you have the biggest presence.