There are all sorts of rental property that is available for you to invest in, from commercial properties and multifamily rentals to single-family homes – and everything in between. Each has its pros and cons. This means that it is up to investors to determine which is the best type for their portfolio. What one investor may fancy may not perform as well for another.
If you are just starting out, the best thing you can do is take a look at the options available and see how well they perform in your current market. Of course, you also need to make sure that your selection will align with your goals and your available cash flow.
Let’s take a look at the 3 most common types of rental property investments.
Types of Rental Property
Single Family Homes. If you ever wondered what the most popular rental investment category was, this is it. As their name suggests, single-family homes are singular dwellings that would be rented out to one tenant or one family.
Condominiums. Condos, as they are more often referred to, are a collection of units that have separate living quarters but share a community space. And, they often come with a homeowners association (HOA). Individuals may buy the condo to reside in it or they may call it an investment and rent it out. Something to consider if you are leaning toward this investment is that HOA’s almost always come with a monthly fee – and some are very stringent with their screening/approval process for renters.
Multi-Family Homes. These are often referred to as apartments but are not part of a bigger complex. They are a building that has multiple different units and can be rented out to different tenants. They each have their own designated, separate space. Keep your eye open as sometimes these multi-family homes can be marked as commercial properties.
Which is Best for You?
Making the right investment means knowing what you want – and what you intend to put forth, financially, and physically. Each different property type brings a different type of tenant, including single individuals, couples with small children, retirees, transients, etc.. Some require more work, such as the landscaping or additional appliances in a single-family home.
When it comes down to your investment, though, you need to make sure that your new rental property leaves you with positive cash flow. Calculate the expenses it will bring and the average market rent – if you don’t have a nice leftover chunk of change, you may want to reconsider the investment.
So, what do you think is your best option for a rental property?
