Getting in the real estate investing business might be tricky. However, deciding on what types of real estate to invest in might be even trickier.
The real estate business is diverse, and choosing the profitable types of real estate for investment purposes is not always easy. So, here we are going to talk about three of the most profitable types of real estate for you to invest in, especially if you are a beginner in the real estate business.
Most profitable types of real estate investment: Renting out via Airbnb
Getting into Airbnb rentals is a good idea most of the time. This can come with great financial benefits for you. Here are some of the advantages of Airbnb rentals:
- Good financial potential: This is why renting investment properties through Airbnb might be better than other rental strategies. You can actually make more money and have a better cash flow through Airbnb. This is due to the kind of tenants it targets. Airbnb mostly targets vacationers, who rent the income property for a short period of time, i.e., short-term rentals. This means that you can control the rent and the property itself better. All you have to do is list your property on Airbnb and wait for it to be rented out. Another benefit that falls into this category is that Airbnb charges owners only 3% on each deal, which is less than other booking or renting websites.
- Good tenants: With Airbnb, you have the ability to pre-scan your tenants. It provides ratings for both tenants (guests) and owners (hosts). In this way you can be assured that the tenants you are letting into your rental property are actually going to take care of it. Another thing to consider is that you get to visit your investment property after every stay. In this way you get to check it and make sure that your property is well maintained.
- Airbnb insurance: Well, this is great news for you if you are considering renting out your property using this type of rental strategy. Airbnb provides protection insurance for up to $1 million for hosts. All you need to do is check the host protection policies to see what it covers and what you need to do in order for you to protect your rental property.
Most profitable types of real estate investment: Traditional renting
Traditional renting is also one of the profitable types of real estate investment. It is all about finding long-term tenants, who are going to pay you on monthly basis. So, here are some of the benefits that come with traditional renting:
- Steady income: When renting out your investment property via traditional renting, you rest assured knowing that you get a steady rental income. In other words, you know when you are getting payments and for how long, depending on the contract.
- Occupancy: When renting out your investment property via a traditional rental, you do not have to worry about vacancy and occupancy. Your income property is occupied as long as there is a valid contract. Let’s say that you sign a rental contract with your tenants for a year. You do not have to worry about your place being empty for a whole year. Then again, besides having constant occupancy, you have a steady rental income for a year.
- Saving time: Yet another aspect of traditional rental is that it saves you time and effort. You don’t have to have constant communication with your tenants. You won’t need to visit your property so often either. Once you meet the potential tenants and sign the contract, you are good to go. Furthermore, you can hire professional property management services that will take care of all matters related to your property. Other than that, you will only need to visit it in case a problem arises.
Related: Difference Between an Airbnb and Traditional Investment Property
Most profitable types of real estate investment: real estate wholesaling
Yet another one of the most profitable types of real estate for investment purposes is real estate wholesaling. Wholesaling means that you, as a real estate wholesaler, need to find real estate properties that are being sold for less than their market value. Then you put the property under contract and resell it to a real estate investor or a homebuyer. This means you will mostly deal with real estate investors who are looking to purchase properties for less than the market value. Keep in mind, that in this case, you need to find a property that is low-priced and still leaves a margin for you to benefit.
For example, you find a house that is worth $150,000, and the owner wants to sell it for $100,000. You put this house under a contract to sell it in a month. Then you start contacting real estate investors that have interest in purchasing it for $115,000. Once you close the deal with the buyer, the owner gets his/her $100,000 and you make a profit of $15,000 from this deal.
Of course, owners who are looking to sell their properties for less than they are actually worth are usually either mortgaged or the property is in a distressed situation. In general, we can sum up the benefits of real estate wholesaling as follows:
- You make good money in a short period of time: Real estate wholesaling is a lucrative business. The good thing about it is that wholesaling deals usually close in a short period of time, which means you can make good money in that short period.
- You can make it with little or no capital at all: After all, you are only a middleman in this deal. So, you won’t need much capital to start in the real estate wholesaling business. You might only need marketing expenses.
Related: How to Buy a House With No Money Down as a Real Estate Investor?
Finally!
Having read about the most profitable types of real estate for investment purposes, it is all up to you. You get to choose what types of real estate to invest in based on your financial and personal circumstances. All of the above types of real estate might be lucrative and greatly rewarding for you as a real estate investor. Just make sure that whatever you choose is the right thing for you.
Learn more about the various types of real estate investment on Mashvisor.