Updated: Nov 8, 2021
Home shopping is fun, especially if you are looking for your dream home. However, purchasing properties for investment purposes can be different. If you opt to purchase abandoned houses, there are several factors to consider; you have to assess the property value from the acquisition, holding, rehab, to selling costs. Apart from these factors, you also have to dig deeper into how investors search for properties as the search process differs from the usual home-searching. What platforms do investors use, the information you have to gather, the property type to best invest in, etc.?
Additionally, home search is more specific for investment properties. When you look for one, you'll run into a more peculiar list of your market's preferences. As an investor, your goal is to grow your investment. And growing your investment means knowing what your market wants. At the end of the day, you are digging in the rough for a gem --- and your gem is your market.
But how will you know that you got the best investment property an investor can have? Are there any criteria or property types you need to consider?
Types of Investment Properties
When looking for a property, it is best to consider the property type, as it should meet your budget, your market, and your goal. The type of property you will choose is your solid foundation while establishing your investment.
What are the different types of properties for investment?
Single-family homes are standalone properties. Investors opt to invest in single-family homes because they have the liberty to determine their profit. Why do investors choose single-family homes over multi-family properties apart from the profit? If you are to invest in single-family properties and you prefer applying for house loans, the approval process is way less rigorous than financing multi-family units. Additionally, the demand for single-family rentals is indeed high.
Investing in single-family properties is one smart move in real estate investing, as it can give you a passive and long-term income for delivering an immediate return.
Condominiums can be a good investment, too, especially for first-time investors with a niche in an expensive real estate market. A few things investors may consider with condo units will include but are not limited to property maintenance, acquisition cost, highly-functional amenities, etc. If you are a flipper, one more thing to consider is the competition which, with condo units, is less. However, compared to single-family homes, you can't go all out with condo units for rental as there are rental restrictions. Additionally, obtaining financing is harder compared with single-family homes, and mortgage rates tend to be higher.
Investors investing in townhouses don't have enough budget to purchase detached properties. Townhouses generally cost less and will save you bucks as it's easier to maintain. Similar to condo units, townhouses have common area amenities that the household can enjoy in the community. However, since townhouses are close together, it means more noise, less privacy, less space, etc., that your tenant wouldn't like. You may have saved enough and spent a little, but the tenant retention rate is low.
The bottom line here is, to establish a growing investment, you have to build a strong foundation first. In real estate, choosing the best property type matters. It sets the stage to a successful investment with a realistic, passive, and long-term income. Failure to determine what type of property you would like to invest with, could also mean failure to meet your budget, your market, and your goal. Real estate investment is one of the smartest and the fast-growing investments, however, if done the wrong way, you might end up losing your investment. So choose your property wisely.
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