Maximizing ROI: Understanding the Different Types of Rental Properties

Maximizing ROI: Understanding the Different Types of Rental Properties

Did you know that the average real estate investor earns over a hundred thousand dollars a year? Of course, it can take some time before a new investor can start making that kind of salary.

You have to navigate the market and learn about the different types of rental properties. While any of them can help you make a profit, some are better at it than others.

For example, single family homes are popular, but they come with a high upfront cost. It can be challenging to find tenants for commercial buildings.

These are only a few things to keep in mind when choosing a rental property. Continue reading to learn more.

Single Family Homes

A single family home is a property that doesn't share walls with another. While tenants may have neighbors, they get to enjoy their own yard.

These are the most common type of properties available to investors. This being said, there are a lot of them to choose from. All you have to do is invest in the right neighborhood.

The loan process is pretty straightforward, and you won't have to deal with disputes between tenants the same way you would if you owned an apartment building.

The downside is that the initial cost to invest in a single family home can be out of budget for some new investors. The other problem is that since single family homes consist of only one unit, they won't bring you any passive income if they aren't occupied.

It can be harder to find tenants during times of economic uncertainty. All it takes is a tiny disaster to create a huge fluctuation in the market.

Multi Family House

A multi family home is a single dwelling that's divided up into several units. Good examples of multi family homes are duplexes, townhouses, and condos.

The advantage of buying a multi family house is that you only have to pay a single closing cost and mortgage for several homes you can rent out. The more tenants you have, the more passive income you can bring in each month.

You can also generate extra cash by including amenities like laundry machines.

Multi family homes come with a higher upfront cost than single family homes. You may find it difficult to find a lender to provide you with funding.

Commercial Properties

A commercial property is a building that's used only for business ventures, like restaurants and stores.

Investing in commercial buildings will mean that you get to be pretty much hands-off. In most cases, your renters will cover their monthly bills and maintenance. They may even be willing to take care of the property taxes.

You shouldn't have to look for tenants often, but when you do, expect your property to stay vacant for a while.

Types of Rental Properties for Investors

Real estate investors have the potential to earn a high income. The problem is deciding on what types of rental properties to purchase.

Some properties come at a high cost but bring an even higher reward. In the case of others, you may find it difficult to attract tenants.

Hiring a property management team can help with that. Contact us today to schedule a consultation.