Investing in real estate can be a great way to make money, but make no mistake – successful income properties require a lot of research and a lot of number crunching. Being a real estate investor also requires being honest with yourself about what kind of investment you can make, what kind of landlord you want to be, and how much time and effort you’re willing to put into your investment. Here are 4 of the most common types of income properties that I recommend for new investors.
Secondary suites are a great way to get started in the real estate investment business, mainly because you don’t have to purchase a second property in order to become a landlord. If you have a basement you can make it into a legal apartment (depending on the laws in your area) and start making money off your existing home. The other bonus is that the upgrades required to create a legal income suite often add value to the home. So not only do you make money from renters, you make money from value-added renovations. That said, secondary suites aren’t for everyone. If you’re considering turning your primary residence into an income property check out my list of secondary suite pros and cons.
Student rentals are the backbone of my real estate investing career, and my favourite of all income properties. It’s how I got my start and I still invest in them regularly. In fact, to date they are still the most profitable properties in my real estate portfolio. There are a couple of reasons for this. One is that when you’re dealing with students you can rent out by the room (which increases your bottom line), and if the property is near a school you’re pretty much guaranteed to have consistent renters. I have yet to find a university or college town that didn’t lack student housing. But that same reason means that you’ll have a high turnover rate (every September!), which will require a bit more work on your part. Check out these student rental pros and cons for more info to help you decide if this is the right type of income property for you.
Executive rentals are usually short term and they come fully furnished with as many amenities as possible. The margins are usually great because they can demand double, or sometimes even triple what the same space would rent for in a more traditional rental situation. But because they’re short term the landlords of executive rentals are constantly in a cycle of posting the apartment for rent, reviewing applications and screening tenants. In this case a property manager might be a good idea because you can factor their fee into the rental price. If you’re considering an executive rental make sure you read this first.
Renting out a vacation property is a great way to have your cake and eat it too. If you play your cards right you can enjoy it when you want to, and have it make money for you when you’re not using it. Vacation rentals are pretty comparable to executive rentals when it comes to how much money you can make, but they also have some of the same challenges in that there’s a high turnover rate and it’s possible they may sit empty for periods of time. Make sure you’ve done your due diligence before you take the plunge and buy a vacation property.
Photos courtesy of Skit Inc.