Investing in the most profitable income generating real estate assets is no longer a challenge with this guide! We will cover the major types of real estate properties that generate income and tell you just how to invest in them. So, without further ado, here are your options:
#1. Single-Family Homes
Single-family homes are one of the most common types of rental properties that beginner real estate investors go for. Besides being beginner-friendly, they are also affordable. Moreover, considering the matter of financing, single-family homes are easier to finance. This is because single-family properties cost less which means you can enjoy a lower down payment when it comes to traditional investment property financing.
SFHs can actually be considered high income generating real estate assets. One reason for this is because of the professional property management aspect. You can actually manage one or two properties on your own. This way, you’ll save up on rental property expenses as much as possible thereby increasing your net income.
As for the utility bills, with single-family homes, you can expect your tenants to take care of that. Therefore, you won’t have to worry about juggling these expenses.
Finally, single family homes are the perfect fit for long-term traditional rentals as tenants tend to view them as homes rather than temporary residences. This means that you will go a long time before you have to look for another tenant. In other words, you’ll enjoy low vacancy rates and a steady rental income.
#2. Multi-Family Homes
Just like single-family homes, multi-family real estate is easy to manage due to two aspects:
- The closeness of the units which means you won’t have to go back and forth between your investment properties
- Shared facilities can make it easier to maintain and repair
If you are an investor who is looking to grow their real estate investment portfolio quickly, then buying multi-family homes for sale is the way. Not only that but you acquire more for less work. In other words, you buy several income generating real estate assets in a single procedure. You will not have to go through the process of buying an investment property four times to own 4 rentals. You can buy a quadruplex and you are set to go!
There is no doubt that a source of multiple income streams sounds like a good idea. If you want that and you have the means, then go ahead and invest in multi-family real estate!
Another great advantage of multi-family properties as long term rentals is easy forced appreciation. Despite the fact that they experience slow rates of natural appreciation, forcing appreciation is a piece of cake. Renovations on common areas, for example, can increase the value of all the units at once.
Finally, the reason that multi-family properties are one of the best income producing assets is that they are low-risk investment properties. Even if one unit is vacant, you won’t experience a 100% vacancy rate. You will still be able to pay for the mortgage or whatever bills you have with the rental income from the other occupied units.
#3. Studio Apartments
Since millennials and younger generations are taking their time buying their dream homes, the rental demand is focused on studio apartments among this age group. They provide a cheaper and more efficient choice for living especially if we are talking about college students. An area around a university or college campus could be the perfect choice for investing in studio apartments.
Other advantages of studio apartments are affordability, low maintenance, fewer utilities, and they could be perfect for short-term rentals as well. It combines the experience of privacy from renting an entire apartment and the comfort and coziness of renting a private room. However, if you are going to be renting out on Airbnb, then make sure you consider a location that is a tourist destination with no strict Airbnb regulations.
#4. Apartment Buildings
Another choice for the best income generating real estate assets is apartment rentals. The best part is that investing in apartments comes with a combination of many of the above advantages. Be it easy financing, high rental demand, or easy management due to closeness, you can find it all in apartment buildings. So, if you are interested in learning all about this type of real estate, read our blog “Are Apartment Rentals the Best Real Estate Investment Strategy for Beginner Investors?“
#5. Commercial Real Estate
This final type of income generating real estate assets is one that we must talk about: commercial real estate. In fact, many investors have been able to make millions of dollars from these real estate investments. However, unlike residential real estate, this type of income property is a bit more complicated to deal with. Therefore, you must get proper real estate education for this one in order to be ready to face the risks. Now, you might be wondering why would we encourage you to invest in such a risky type of property? Here are the reasons:
- First, there’s the obvious better potential for higher income. Commercial real estate generates more in monthly income. Thus, you can expect a higher ROI.
- You are working with professionals. A business owner cares about his/her reputation. So, typically, these tenants will pay the rent on time.
- A business owner will take care of your investment property. Why? Because it’s their working space and it can be detrimental to their business especially if they have clients coming in and out at all times.
- Finally, no late night calls! Unlike residential real estate, commercial properties are vacant by the end of the working day. So, this usually means that you don’t have to worry about a call in the middle of the night about a broken faucet. You can also install security software which will help you monitor your investment property without having to be there 24/7.
How to Invest in These Income Generating Real Estate Assets
Now it’s time for the million dollar question: How do you invest in these income generating real estate assets for the best returns? How do you go through the process?
First: Have you figured out your finances? Do you know what method you are going with? Do you have enough to live on? Well, you might want to click here to learn how to get your finances in order before getting into real estate investing.
Second: Conduct a real estate market analysis as well as an investment property analysis. You should look for high figures of capitalization rates, cash on cash return as well as high occupancy rates. Our real estate investment calculator will help you with that, of course!
Third: Decide what type of income property you are interested in. Moreover, decide what type goes best with your choice of location.
Fourth: Get pre-approved for a financing strategy unless you are planning to pay in cash.
At this point, you’ll be the new owner of an investment property. Manage it well and start making money.