There are all many types of investment properties in Phoenix that you could choose from. What is right for one person may not be right for another! Find out what is right for you in our latest post.
Every person will be drawn towards different kinds of investments. The amount of time and money you are able to put into a property, as well as the return your investment requires, will help you decide how to invest. Below, we take a look at some of the most common real estate niches so you can choose the one that is right for you.
Single-family rentals are the most common type of rental investment. For that reason, they also tend to have the most competition to acquire them. Typically single-family homes are easily maintained and attract long-term renters as opposed to those renting apartments. Single-family homes are more easily resold and can be occupied by the owner down the road. The downside is that if your tenant moves out, your income from the property will be zero and you will have to cover the utility costs and potentially any existing loan that your tenant was previously paying.
Multi-family properties might require a little more work or a larger investment, but the rewards can be substantial. Having multiple tenants is great as it is very unlikely they will all decide to move out at the same time, meaning you will always have predictable income coming in from the property. However, more tenants mean more repairs, more complaints, and more time collecting rent. If you get the right tenants in place, these factors shouldn’t be an issue.
Anything over 4 units is considered a commercial property and will require different types of funding than your standard mortgage or FHA loan. An apartment building can require a good amount of maintenance and work to keep your tenants happy. Many landlords choose to hire a property management company to handle all of the day to day issues. This should be factored into you rnumbers before you decide to buy.
The biggest draw to wholesaling property is that you don’t ever have to buy a property in order to make money off of it. However, in competitive markets, your marketing budget can get bloated very quickly, so it’s imperative to know what your returns are. In wholesaling, for a fee, you will locate and contact potential buyers on behalf of the seller and assign them the contract. While the profits may seem slow at first, they can grow as your knowledge expands. Wholesaling properties isn’t for everyone, but if you are great at sales and networking and the systems to manage contacts, it could be an option for you.
While the trend of flipping homes has cooled down a bit, there are still plenty of profits to be made. To effectively flip a house, you should have some level of construction experience or access to trusted advisors, a budget, and a timeline/plan. Know exactly how much time you have in order to resell the house in order to achieve a profit. It is wise to have a “plan b” just in case you aren’t able to sell the home in the timeframe you’d initially projected. Many flippers have their profits eaten away by being stuck with the mortgage, utility costs, maintenance costs and the cost of listing and the surprises that spring up along the way. Factor these in when determining if a property will be a profitable investment.
Owning land is the easiest way to get into real estate investment. There is little to no maintenance. No bad tenants or repairs required, and you can get started with very little money comparatively. For a few thousand dollars you can find a nice lot, hold it or build, or even wholesale it and turn that piece of dirt into cold hard cash.
More people are choosing to rent a house from a private owner when they travel as opposed to staying in a hotel. Many people make a living simply by being hospitable in today’s sharing economy. In many cases, an owner can make in a week what they would make in a month renting to a traditional tenant. Be mindful of city ordinances related to vacation rentals as legislation threatens the livelihoods of vaction rental investors in a number of markets nationwide.