One of the greatest things about real estate investing, no doubt, is the immense diversity. The world of real estate investing is so varied that any real estate investor can find something to suit his/her taste and needs. Nevertheless, in all this real estate diversity, all investors look for one and the same thing: to make money, and the more money the better. Thus, in an effort to help all real estate investors – current and future – out there, let’s take a look at the most profitable types of real estate investments:
1. Traditional rentals
Undoubtedly, one of the most profitable types of real estate investments is also the first real estate investing strategy that comes to the mind of any investor or regular person: long term rentals, also called traditional rentals. Buying and owning an investment property for the purpose of renting out this real estate property in the long term can make money – a lot of money, to be precise. There are two basic venues in which a rental property can make money for the real estate investor and landlord. First of all, you collect a monthly rent from your tenant, which works as the rental income. This means that with this type of real estate investment properties you make money on regular basis. It is important to choose the type of your income property and its location carefully in order to maximize your rental income. Thus, you should perform an investment property analysis to see what rental income, cap rate, and CoC return you can expect. This is best done with the help of a rental property calculator, like Mashvisor’s investment property calculator. Mashvisor’s rental property calculator will help you choose both the best location (city and neighborhood) and the best real estate property.
Related: How to Use Mashvisor’s Rental Property Calculator
Second, once you decide it’s time to sell this real estate property in order to buy another, bigger rental or to replace it with two income properties, you will make money from the real estate appreciation. Though virtually every real estate property is bound to see appreciation in value over time, you should attempt to buy your investment properties in a location that is expected to undergo significant growth and improvements in the near and medium term because these are the real estate properties that will experience the most appreciation in the long term.
2. Airbnb rentals
The second investing strategy in the list of the most profitable types of real estate investments properties are short term rentals, also known as Airbnb rentals. Although Airbnb is a relatively new concept in the real estate investing business, an Airbnb income property has a very high potential to make money for its real estate investor and landlord. No wonder the Airbnb rental strategy has undergone such significant growth in recent years. When you buy your investment properties, you as a self-respecting investor should use a rental property calculator for the investment property analysis to get the most important profitability figures. Mashvisor’s investment property calculator will show you the expected rental income, cap rate, and CoC return for both traditional and Airbnb, which will help you choose the optimal rental strategy (traditional rental strategy or Airbnb rental strategy) for each income property. If you decide to opt for Airbnb rentals, make sure to check out the local legislation related to short term rentals. Under pressure from the hotel industry lobby, many states and cities have been tightening their Airbnb rentals regulations. Nonetheless, if you choose the best rentals location, Airbnb can be one of the most profitable types of real estate investments, frequently offering higher return on investment than the traditional rental strategy.
3. Fix-and-flips
Another top choice among the most profitable types of real estate investments are fix-and-flips. This real estate investment strategy is especially good – or even the best investing option – for real estate investors looking for opportunities to make money fast. However, fix-and-flips require an investor to have expert-level real estate knowledge and some serious work over the course of a few months. In addition to finding a real estate property with high potential, you have to go for the easiest and cheapest fixes to implement which will bring about the highest increase in value. This requires both real estate knowledge and creativity. Finally, you have to market the fixed real estate property well to make money in the best possible way when you sell it. Although putting efforts to fix your properties is needed in this investment strategy, if done correctly, fix-and-flips will make money for the investor almost immediately. That’s why they are one of the most favorite types of real estate investments for investors looking for quick profit.
Related: 5 Tricks to Save on Fix-and-Flips
4. Commercial real estate investing
The most profitable types of real estate investments are not limited to residential investment properties only. Commercial real estate investing can yield high return on investment too. Usually you can get much better rental income from commercial real estate for rent than the rental income from residential real estate rentals because your tenant will be a business rather than an individual. Moreover, you are less likely to encounter problems with your tenant as a landlord with a business because a business will put efforts into keeping your investment property in a good shape to attract and retain its own clients. In addition, companies rarely fail to pay the rent on regular basis as they want to make sure they keep their location.
Related: What Are the Best Ways to Make Money in Commercial Real Estate for Rent?
5. Real estate wholesaling
The final top choice among the most profitable types of real estate investments is wholesale real estate. This real estate investment strategy is very similar to fix-and-flips and can be applied to both residential and commercial real estate properties. The idea is simple: a real estate investor makes a contract with a property seller and then assigns the contract to a property buyer. The trick is to have the buying price significantly higher than the selling price because that’s what you make money from. The best part about real estate wholesaling is that it requires only minimal financing – to cover your operational expenses – as you as a real estate investor don’t need to actually buy the property, i.e., you don’t need to pay for it. Similar to fix-and-flips, that’s a great way to make money in the short term with real estate properties.
As a new or experienced real estate investor, you are undoubtedly looking for the most profitable types of real estate investments, right? After all, your ultimate goal in real estate investing is to make money. With the list above of the best types of real estate investments to make money in the short term as well as in the long term, you are guaranteed to succeed in your real estate investment business. For the best advice on the road to becoming a successful real estate investor, make sure to check out Mashvisor on regular basis. Moreover, remember to come back to us when you are ready to start investing in real estate properties to check how profitable (rental income, cap rate, CoC return) a particular investment property is with our investment property calculator and what the best investing strategy (traditional vs. Airbnb) is.