Managing an investment property is a lot of work, often requiring knowledge in numerous areas. Most new investors only come to learn this with time. That is why Upkeepmedia.com
advises it is essential that, as a new property investor, you keep it simple when buying your first investment.
As a beginner, your initial decisions lay the tracks for the eventual direction that your investments will take. That first property can easily terminate your real estate investment dreams or determine how fast your investment property portfolio grows.
As much as possible, you want to eliminate all complexities when buying your first property. Ideally, the investment should be able to “plug and play.” You do not have to go through a lengthy set-up process to make it ready for tenants.
Ideally, it should start making money for you immediately. Moreover, it must be the kind of home in high demand, and it should be in an area with a large population of your target tenants. What kind of homes meet these criteria?
In this post, you will find six low-risk investment property options for new real estate investors. These homes in this list are always in demand; they do not require a lot of work to oversee, and they let you learn the intricacies of rental property management on the go.
6 types of homes first-time property investors should look for?
1. Low-priced homes
Buying a cheap home is easier because of the lower down payment. You have more room for value appreciation via market forces or home improvement. Just be sure the house is not cheap because it has hidden problems or the neighborhood is bad. What you want is an undervalued home in a great neighborhood. But these types of properties often need some TLC. You may also look for a home in an up-and-coming neighborhood. When using this method, it pays to have a trusted and experienced contractor by your side.
2. A single-family home near an elementary school
You can’t go wrong with single-family homes in a suburban neighborhood with a highly-rated school district. Look for elementary schools with a score of at least 7 out of 10. Those are in high demand, and parents typically want their homes to be within walking distance of their children’s schools. These homes have a lower-than-average turnover rate because the families desire stability, rarely move and are likely to renew the lease. You may also expect the value of the home to appreciate in a very short time.
3. Multi-family homes (Duplexes)
Multi family homes are usually not the best option for first-time investors unless you are thinking of a duplex. Unlike other types of multi family homes, which are more competitive, duplexes are fairly easy to find, finance and manage. A duplex is simply two single-family homes on the same lot. Buying a duplex is also a good way to get started as a property investor if you plan to live in one of the units. As an owner-occupier, you get a lower down payment, as low as 3.5%. But you may have to live in the home for a certain period.
4. A single property with two separate entrances
A single property you can legally lease to two tenants is a great way to start as an investor. The additional rental unit in the property can be a mother-in-law suite, a finished basement or a furnished garage. It can be an additional dwelling unit (ADU) beside the main house. As long as you are legally permitted, you can create two income sources from a single investment. Note that in most places, you can only use an ADU for long-term rentals.
5. Student housing near universities
Affordable rental units that are conveniently located near a university are always in high demand, especially if they are within walking distance of the school. These can be studio apartments, condos, or other accommodations favored by college students. These rentals have a higher turnover, but the equally-high demand more than makes up for this. Having to deal with college-age renters brings its own challenges, but these types of renters are more resistant to market forces.
6. Turnkey rental properties
Buying a turnkey property means you can skip almost all the steps you would normally go through to set up your rental property. Firstly, these rental units have already been renovated. You can just buy one and rent it out immediately. Secondly, some companies will even go a step further to find a tenant for the rental and go on to manage the unit on your behalf. With a turnkey property, you get a rental that is generating income from day one.
Which of these options do you think is the best for you? Let us know in the comments below. You can also talk to us if you have any questions about how to implement any of the strategies we have discussed.
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