What are the best types of rental properties for investing in real estate, how are they different, and where can you find them?
Rental properties are among the most common type of real estate investments due to their low risk and high reward when it comes to profits.
When you want to invest in rental properties, you will find many types of rental properties to choose from. Each type of rental property has its own advantages and disadvantages, and the types of tenants that they attract are very different from one another.
When I’m talking about the different types of rental properties here, it is important to point out that I’m not talking about rental strategies, but the type of the property itself.
The difference is that rental strategies are the method that you want to use when renting out the property. These include short-term rentals and long-term rentals.
However, types of rental properties include different classes of properties based on their location, structure, size, and the way they are managed.
Types of Rental Properties
Virtually any type of real estate property can be a rental property. Even a parking space can be considered a rental property if you’re renting it out to people who want to park in it.
However, in this article, I will be focusing on residential properties. The most common types of residential rental properties include:
- Single-family homes
- Condos/Coops
- Multi-family homes
- Luxury homes
- Vacation homes
- Getaway homes
Below are more details about each of these types of rental properties.
Single-Family Homes
Single-family homes are the most common type of properties anywhere in the world. This is because the term single-family home can be applied to several property classes, even if they included other types of rental properties such as luxury homes or vacation homes.
When looking at websites like Mashvisor, for example, if you set the property type filter to single-family homes you should expect to see several types of properties in the results. These can include townhomes, apartments, and other types of properties.
Related: Investing in Single-Family Homes: Why It’s a Must
Condos/Coops
Similar to single-family homes, condos and coops can be a general term to use for properties that are managed by a Home Owners Association, regardless of their type or class.
Some examples of condos and coops include apartment buildings, villas and other types of properties that are part of a larger complex. These properties will often share a common space with other units in that complex and will be managed by an association that will handle several aspects of the property and the area surrounding it.
The most important aspect that should be pointed out about condos and coops is that if you want to invest in them, you should always keep in mind the HOA fees that you will have to pay as the owner of this property.
Multi-Family Homes
Multi-family homes are properties that include several units that can be rented out separately.
Unlike condos and coops, however, multi-family homes are not part of a complex. Instead, apartment buildings with several units can be considered as multi-family homes, as well as properties that are split into different units that you can rent out to multiple tenants or families separately.
Multi-family homes are typically the most complicated types of rental properties for analyzing because the performance of the property is based on the performance of each unit separately.
Also, multi-family homes can sometimes be considered as commercial properties depending on the number of units in each property.
Luxury Homes
Luxury homes are types of rental properties that are typically modern and equipped with cutting-edge technologies and appliances.
These properties will include more utilities and amenities than other types of properties, making them among the most expensive types of rental properties to invest in.
Typically, luxury homes will have lower occupancy rates due to them having much higher rental rates. Meaning, if you own a luxury home, expect not to rent it out as often as other types of properties. But when you do find a tenant, expect that tenant to pay a large amount of money for their stay (as long as you provide them with the luxury).
This also makes luxury homes a high-risk investment to make, but when managed correctly they can generate higher profits than other types of properties.
Vacation Homes
Vacation homes are types of rental properties that are located in areas that attract tourists and vacationists.
You will usually find these properties in coastal areas, or in areas that attract vacationists during the winter season.
Vacation homes are known to be highly seasonal rental properties. Meaning, these properties might not generate large amounts of money most of the year, but in the high seasons (usually summer or winter) their profits will increase significantly as the demand increases, allowing you to ask for higher rents without sacrificing your occupancy rate.
Related: 5 Best Places for Vacation Rentals in the US Real Estate Market 2018
One of the biggest advantages of vacation homes is that the owner of the property can use it as a vacation home to stay in during their family vacations or as a leisure stay.
Getaway Homes
Getaway homes are types of rental properties that are usually located in remote areas outside of cities, or in isolated areas in the wilderness or in the mountains.
These properties can be very cheap to purchase, and they are simple and small-sized properties that are made out of wood.
Most of these properties consist of a single story, with the possibility of a smaller second story. People who rent this type of properties are mostly people who want to enjoy some time away from the busy life of the city or to focus on certain tasks for a few months, which is why they are very popular among writers who rent them to focus on their writing and finish the books that they’ve been working on.
Types of rental properties that are included in this category can include cabins, cottages, bungalows, and chalets.
Where Can I Find These Types of Rental Properties?
You can use any of the available online sources to search for properties based on their type.
Airbnb, for example, allows you to filter properties based on their type in order to find the perfect property that you want to rent.
However, if you’re looking to find properties to purchase and rent out as an investment, websites like Mashvisor allow you to use filters based on the different categories, like townhomes, single-family, multi-family, or condos and coops.
To learn more about our product, click here.
Additionally, Mashvisor gives you details and analytics about each property. When coupled with the market reports that you can download, you can compare the different types of rental properties in an area to see which one is generating the highest returns before purchasing an investment property to rent out.
Bottom Line
There are several types of rental properties in real estate. Choosing the right property type for your investment will determine the amount of management that you will have to provide as well as what you can do with the property in order to maximize its returns.
Different types of properties require different levels of management and will attract very different types of tenants. For this reason, make sure to choose the type that suits your personality best, and do your research to figure out the best ways for managing the type that you chose.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Also, make sure to check out Mashvisor’s platform to see how you can find the perfect rental property to invest in using predictive analytics and the tools and features that we have.