Residential real estate investing is the most common type of real estate investing for a reason: it is easy to get into, it has low risk, and it doesn’t need a large amount of money to invest in.
This blog aims to delve into residential real estate investing, what it is, and what the most common and profitable types of it are.
What Is Residential Real Estate Investing?
Residential real estate investing is, in its simplest form, investing in residential properties that serve the purpose of providing people with a place to live in. Residential real estate properties can include single family homes and multi family properties, condos, small apartment buildings, vacation homes, studios, apartments, or even single rooms within a housing unit.
Residential real estate investing can include any investment in a residential real estate property regardless of the type of investment strategy that is being used. And while investing in a residential property with the purpose of living in it yourself can also be considered a type of residential real estate investing, this blog focuses on the most profitable types of residential real estate investing that aims to make money for the investor.
How Do I Make Money in Residential Real Estate Investing?
There are several different types of residential real estate investing strategies that are designed to make money for real estate investors. The most notable and common strategies of residential real estate investing involve purchasing a residential property for the purpose of either renting it out or selling it back for a margin of profit.
Residential real estate investing is a very popular investment due to how easy it is to get started and because of the low level of risk associated with it. And while many real estate investors choose to branch out into other types of real estate investing such as commercial and industrial real estate, residential real estate investing when done right can be a very profitable investment, and it can lead you to earn 6+ digits/year eventually.
Residential Real Estate Investing: Become a Landlord
The most common type of residential real estate investing is rental property investing – purchasing a property for the sole purpose of renting it out. Investing in rental properties would mean that your main source of income from your investment comes from your property’s rent. This, however, means that in order to make a profit from your rental property, you need to make sure that it remains occupied for the majority of the time.
If you decide on investing in a rental property, then you would become a landlord. But what does it mean to become a landlord?
Related: What Are the Major Incentives to Buy and Rent Residential Properties?
If you’ve ever lived in a rental house, then you’ve probably had to deal with a landlord at some point – a person who gets paid for doing nothing but owning the property that you rented. This isn’t entirely true, however, as there is much more to being a landlord than just getting paid. Investing in a rental property means that you will have to tend to your investment property and to your tenants all the time if you want your investment to be successful.
This is the reason why many real estate investors are hesitant when it comes to becoming a landlord; they don’t want to get a call from their tenants at 3 in the morning saying that the toilet is clogged and it needs fixing.
If you’re one of the people who are interested in the idea of becoming a landlord but not so much in the responsibilities and tasks that come with it, don’t worry too much about it – property management is the solution. Hiring professional property management for your rental property allows you to enjoy the passive rental income that comes with being a landlord without worrying about all the other responsibilities of managing your property. Professional property management will take care of all your rental property’s needs: from finding the tenants, through tending to them, maintaining the property, handling turn-overs, to marketing and advertising your property for you – property management is the perfect solution for you.
Of course, it comes at a price. Most professional property management companies get paid the first month’s rent whenever a new tenant signs a lease, as well as 10% of each month’s rent on average. So, before hiring professional property management, make sure to include it in your expenses calculations so as to not end of losing money from your rental property.
Related: The Advantages and Disadvantages of Using Residential Property Management in Real Estate Investing
Residential Real Estate Investing: Airbnb
Airbnb properties are rental properties with a modern twist. Airbnb rental properties are short-term rental properties that are rented out to tenants for shorter periods of time, typically less than 6 months, through Airbnb.
Airbnb is a website that allows property owners all around the world to list their rental properties for any prospected tenants – mostly travelers – and partially handle the management of these properties.
Despite it being relatively new, Airbnb is becoming one of the most common types of residential real estate investing, and in some cities, it is becoming among the most profitable types of investments. This is due to the rising number of travelers around the world who are looking for a place to stay for shorter periods of time and at more flexible prices.
Related: 7 Steps to Buying a Rental Property
The best part of Airbnb rental properties is that you don’t necessarily have to purchase a property for the sole purpose of renting it out. Instead, you can rent out a room or a section of your own residence to prospective tenants, allowing you to generate an extra income without the hassle of becoming a landlord.
It should be noted that Airbnb is facing several legal issues in some states and cities around the US due to pressure from the hotels and housing lobbies. This is because the competing prices of Airbnb are attracting more and more tenants, reducing the number of people who only rely on hotels for short-term stays.
Residential Real Estate Investing: Fix-and-Flip
If you’re looking to make money quickly through residential real estate investing, then fix-and-flips are for you. Fix-and-flip properties are residential real estate properties that are on the market for a low value due to being in a bad condition or needing plenty of reparations and renovation. Investing in fix-and-flips means that you will be buying these properties at a fairly low price with the purpose of fixing/renovating them before selling them back for a higher price.
You must keep in mind, however, that in order for your fix-and-flip investment to be profitable, you need to make sure that the selling price of the property is higher than the price at which you bought the property and the costs of renovating it combined.
Residential Real Estate Investing: Conclusion
There are several ways to make money in residential real estate investing. And while it might not earn you a profit as high as you could make in commercial or industrial real estate, residential real estate is an entry-level investment due to its low risk, and with a good strategy and planning, it could make you more money than any full-time job.
Also, make sure to visit our website at Mashvisor for more blogs and guides related to real estate investments, and sign up to gain access to our real estate investing tools that help you make the best real estate investments in no time.