One of the great things about real estate investing is the variety. There are so many types of real estate investment that the industry has something to offer to every single real estate investor out there.
Want to make money quickly with real estate investing? Go with wholesaling real estate! Want to make more rental income per night? Airbnb rentals are the answer! Want to generate a steady, passive income? Try long term rentals! Whatever a real estate investor desires, he/she can find fitting types of real estate investment in the field.
But what about when it comes to real estate investing for beginners? In this case, the variety in the types of real estate investment can be somewhat of an obstacle. What is the best way to get started in real estate investing for beginners? This decision can make or break a real estate investing career. Choose the wrong types of real estate investment, and you could end up losing money. Avoid this blunder, and choose from the best types of real estate investment for beginners from our list.
The Best Types of Real Estate Investment for Beginners: Single Family Homes
If you have been reading up on all the different types of real estate investment, it might come as no surprise that single family homes are number one on this list. Let’s investigate two major reasons that are the basis of why single family homes can be the best real estate investments for beginners.
Single Family Homes: The More Affordable Investment Properties
When it comes to single family vs. multifamily rentals, single family homes are the more affordable investment properties, hands down. Just take a look at any listing price for single family homes compared to multifamily homes.
Not only is the initial investment property price lower, but the rental property costs are lower as well. With a smaller investment property tend to come lower costs for any kind of maintenance imaginable. There are no extra maintenance costs for common areas either, like with multifamily homes. Landlords of single family homes find that their tenants take better care of the investment properties as well. This is because single family homes tend to feel more like a real home to tenants than an apartment. Rental property management becomes much easier and the maintenance much cheaper.
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Even the tax deductions are greater for single family homes, making them the more affordable investment properties. This includes a longer depreciation period. These types of real estate investment also have lower property taxes, insurance rates, and even interest rates.
Why does the affordability factor make single family homes one of the best types of real estate investment for beginners? Well, first of all, a beginner real estate investor may not have the funds that a more seasoned investor would have accumulated from other rental properties. In addition, the more affordable the investment property, the more properties a real estate investor can purchase to expand his/her investment portfolio and increase his/her overall rental income and return on investment.
Mortgage Lenders Love Single Family Homes
Real estate investing for beginners can be a bit difficult when it comes to getting approval for investment property financing. Mortgage lenders are taking on a risk of default on every investment property. They tend to see beginners in real estate investing as an even greater risk.
Luckily, mortgage lenders generally view single family homes as a low risk real estate investment. This is because they are pretty stable in almost every real estate market, no matter the conditions. Single family homes also retain property value consistently: when they go down, property prices for these types of real estate investment are bound to come back up. Because of this, with the right single family investment property, mortgage lenders will offer relatively lower interest rates and monthly mortgage payments. All of this means more rental income going into the pocket of the real estate investor.
So, what is the “right single family investment property”? It’s one that has good cash on cash return, cap rate, potential rental income, and return on investment. How can a beginner real estate investor find such low risk single family homes which mortgage lenders will love? One place and one place only: Mashvisor. Mashvisor’s rental property calculator will help you find the best types of real estate investment to land you the best investment property financing.
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We could go on and on as to why single family homes are the greatest, or you could read: Why Single Family Homes Are the Best Rental Properties.
The Best Types of Real Estate Investment for Beginners: Duplex House
One of the best ways to get started in real estate investing is with a duplex house in combination with an owner-occupied investment strategy. A duplex house is technically a multifamily home but still in the realm of residential real estate investing. However, it can be a great stepping stone towards commercial real estate investing for beginners. Why is a duplex house one the best real estate investments for beginners?
A Duplex House Qualifies for FHA Loans
Most types of real estate investment do not qualify for FHA loans, to the disappointment of real estate investors who know that with FHA loans come with a significantly lower down payment: 3.5%. Fortunately, a duplex house offers a kind of a loophole. As long as a real estate investor is willing to be an owner-occupier of an investment property for a year, he/she can save a lot of money on a down payment. All the while, the real estate investor will be making rental income from the other unit in the duplex house. This is why a single family home investment property is not ideal for this type of investment property financing.
Being an owner-occupier has other benefits, even though some real estate investors turn away from this investment strategy and miss out on the low down payment. Real estate investing for beginners with a duplex house can be a great way to learn all about hands-on rental property management.
Double Your Rental Income After One Year
What other types of real estate investment promise that, within a year, rental income will double?! None. An FHA loan only requires you to live in the investment property for a year. After that, you can move out and make rental income from both units in the duplex house. This increases your return on investment and allows you to qualify for another investment property financing loan after another year.
Need more reasons why a duplex house is ideal for beginner real estate investors? Read here: Is a Duplex House a Good Real Estate Investment?
The Best Types of Real Estate Investment for Beginners: Turnkey Rental Properties
Turnkey rental properties are types of real estate investment which are provided by a property investment company. Basically, the company has chosen what they perceive as the best real estate investments in the housing market. They, then, prep the investment property and, sometimes, even find tenants to get the ball rolling on rental income. There are two reasons why turnkey rental properties are the best types of real estate investment for beginners:
Learn a Ton with Less Risk
Real estate investing for beginners should be all about learning how to be successful with investment property. That’s what makes turnkey rental properties the best way to get started in real estate investing. A property investment company has done all of the risky work for you: choosing where to invest in real estate and selecting the exact investment properties through real estate market analysis and investment property analysis.
Your job as a beginner real estate investor would be to learn why and how they chose such investment properties. In this way, you learn all about investing in real estate without making any real mistakes. Of course, for this to work, you need to thoroughly research the turnkey rental properties company.
To learn more about all aspects of real estate investing, continue reading our blog.
Rental Property Management Is Often Provided
While single family homes and even a duplex house can make rental property management somewhat easier, turnkey rental properties can take care of it all for you. Most of these companies provide rental property management and take care of finding tenants and the day to day maintenance of the turnkey rental properties for a reasonable fee. This can also be a source of education on real estate investing for beginners for the real estate investor who watches the professionals closely and takes note of how things are done successfully.
The Best Types of Real Estate Investment for Beginners: Real Estate Crowdfunding
Looking for the best way to get started in real estate investing without worrying about buying and managing a rental property? Then real estate crowdfunding is a great choice for you. In the past, real estate crowdfunding was mostly for accredited real estate investors. Now, there are plenty of real estate crowdfunding sites like Fundrise and Realty Mogul which allow non accredited investors to invest. This includes beginner real estate investors with no real track record of successful investment properties and limited funding for real estate investments. Here is why a beginner should choose real estate crowdfunding:
Little Capital Is Needed
Real estate crowdfunding sites like Fundrise and Realty Mogul allow a minimum cash investment of $500-1,000! That is significantly lower than any down payment you’ll find with mortgage lenders. A beginner real estate investor can begin to build wealth while investing practically no money in real estate.
Receive Passive Income
With real estate crowdfunding, there is no work beyond choosing the platform that’s right for you. While this research will require some effort, it’s negligible compared to the work of rental property management. Essentially, real estate crowdfunding will bring passive income to a beginner real estate investor.
Now that you know the best types of real estate investment for beginners, learn all about: Best Places to Invest in Real Estate: 7 Cities with Highest Returns.
Now that we’ve narrowed down the 4 best types of real estate investment for you, getting started should be easier. Start looking for investment properties in the real estate market with Mashvisor.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.