Deciding on investing in real estate is one that’s a lucrative one and, if done right, can also bring in huge amounts of profits. Real estate investments may get tricky at times, but if you have the proper guidance and guided in making informed decisions, you cannot go wrong with making good profits in real estate investing.
Whether you are a novice investor or an expert investor, being watchful of the trends too can come a long way in determining your overall real estate investing success.
To begin with – what are the best property types to invest in 2020? This blog is an overview of the three best property types in which you can safely invest your money in the year 2020. Read on!
What are the three best property types to invest in 2020?
Number 1 – Residential Rental Properties
Residential Rental Properties, without any doubt, has to top the list while talking about the best property types to invest in, be it any year.
Real estate investing started or begun from residential property types, and because there’s a good reason to it, these properties still are one of the best types to invest in, both from short term and long term properties.
Countless investors have made a fortune by investing in residential rental properties. You can, too – if you know how to get it right.
Here are a few quick things to take note of while learning how to make good returns on residential rental properties:
- Do your due research on the location of the property – Real Estate Investing can depend mainly on the location of the property. If you don’t get your location right, many things may go wrong. Remember that even the best of the best rental properties which are in good condition and have every facility that a potential tenant would ever need would not serve the purpose of the property is in the wrong location. Typically, a good location is one that has a good neighborhood, parks, schools around, shopping malls, theatres, hospitals, and other amenities that make the neighborhood more live-able. Thus, doing your due research on choosing the best location for your rental property could be your first step.
- Look at the overall costs of the property associated – While it’s very enticing to look at the rental properties from the viewpoint of – how much I can make per month through rental income, what’s more, important is to dissect the overall costs that are associated with the property. These costs may include everything that begins from paying brokerage fees to a broker that showed you around to determining the overall repairs and overhaul expenses which are needed to be done for the majority of such rental properties. Only when you are sure about the overall costs that may be associated with your rental property, will you be able to accurately determine if investing in a particular type of property will be profitable to you in the long run or not. So, no rush. Take your time, but ensure that you get your numbers right.
- Mortgage expenses are not to be ignored – Now, you might be in a place where you can buy the property in full cash payment. But more often than not, you will need to look for a mortgage loan to be able to fund your purchase. In such cases, it’s very important that you include all the expenses related to your mortgage loan as part of your home costs. Also remember that some expenses in relation to your mortgage loan are recurring like – monthly interest costs, which is a regular expense and must be deducted from monthly rent so you can get a picture of how much you can make per month. It is very likely for novice investors to completely disregard the loan expenses in this light and arrive at an inflated monthly rental income, only to realize the drawbacks of such miscalculations at a later point of time.
- Consider all other maintenance costs – There can be other maintenance costs associated with your rental property, which goes beyond mortgage expenses and renovation costs. These could be the elephant in the room is ignored. What are the costs that you might have to typically incur every month to keep your rental income coming? What are the costs associated with the heating or cooling systems of the building? What are the costs of waste management of the property? Does the rent cover lawn maintenance expenses, and how much would that be? Consider all the costs that might have to be incurred by you to keep your rental property in the best condition for your potential tenants.
- Determine the average rent, tenant occupancy, and vacancy rates in the target area – Before zeroing down on the residential property you want to invest in, determining the average rent of the locality, tenant occupancy rates will give you a clear picture of what you’re getting yourself into. The average rent of property again depends on the location of the property, and the valuation of the property alone is not the most important determining factor that decides how much rent you can expect. You may need to consider the average rental prices charged on similar properties in the same locality to arrive at a more reasonable figure. Besides, tenant occupancy rates will tell you how likely is it for your residential property to be filled by tenants in a month or two. That’s also an important factor that needs to be looked into before you zero down on the rental property that you want to invest in.
Number 2 – Commercial Real Estate Properties
The next on the list of the best property types to invest in 2020 would be Commercial Real Estate Properties. Renting out to business tenants is better than renting it to salaried tenants for two reasons:
1. Business tenants take their Commercial space seriously and are genuinely vested in its well-being because they want their space to be attractive to their customers.
2. Business tenants generally pay up on time, and so you don’t have to juggle around with your tenants every month asking or reminding them about the due rent. Here are two quick notes to take care of while investing in commercial real estate properties:
- Figure out the best Commercial real estate property type to invest your money into – There are various types of commercial real estate properties you can invest in, with each having their unique set of pros and cons. Figure out the types that work out best for you before zeroing down on one type. Multi-family properties are currently on the leading front, and if you can get your guidance and follow-through right, it can be very lucrative.
- Calculate the overall costs associated with your commercial real estate property investment – it is very similar to residential property investing. You need a clear picture of the overall costs that you might be incurred while investing in commercial real estate. These costs include the costs associated with your commercial real estate mortgage loan, repairs and renovations expenses, maintenance expenses, expenses to marketing or advertisement did to fetch potential business clients, and so on. It’s a great risk to get into any type of real estate investment without estimating the overall costs associated with such investments.
Number 3 – Flipping Properties
Flipping Properties is another great way of making a fortune in real estate investing. And as a general rule – Flipping Properties is not only about knowing how to best repair or renovate a property but knowing to choose the best homes to work on in great locations or neighborhoods! You may think that it’s easy to flip properties and something that’s a no-loss deal, but let us remind you that you are wrong.
If you get your location of the property wrong, the chances of you making good returns on flipping properties will dropdown. Imagine a case where you’ve worked up a home property by doing a lot of repairs and renovations. All your efforts would go down the drain if this property is in a location where tenants aren’t willing to move in. Best of the best renovations will do no good if your property exists in a poor location in the first place. Thus, you can safely conclude that the single most important factor for being successful with Flipping Properties is to determine the right location for your property.
Another important factor to consider before you decide to fix and flip a property is the time period that’s needed to do it. While some properties may only need a few quick fixes and refurbishing, some properties would call for a complete makeover. Depending on how much you want to fix and renovate the property, you can come to a conclusion on how long it’s going to take you – which helps determine the best loan options to choose from.
Final Words: Whether you want to invest in residential rental properties, commercial real estate properties, or fix-and-flip Properties, remember that at the end of the day – your real estate investment success is determined by how well you manage your investments and the result of collective decisions that you make. Hiring a reliable real estate expert or an agent to help you get through the process is very much recommended unless you want to leave your real estate investment to chance or intuitions.