Over the years, we have seen many types and forms of real estate investing. What we have learned is that the most successful investors build a niche in a certain type of real estate investing. They specialize in an area, a type of investment real estate, or a process of investment.
Here are some examples of common domains of expertise:
1-4 Family or Investor Owned Residential Real Estate
Perhaps the most common investments for most first time investors are 1-4 family rental properties. The primary reason is because an investor can use the secondary market as a resource for long-term fixed rate financing up to 10 properties and these types of properties are relatively easy to rent, easy to sell, and easy to finance. However, the drawbacks include limited diversity in rent stream and higher maintenance and management costs per unit.
We see a lot of local investors who may focus on these rentals in certain submarkets. For instance, perhaps they are student housing rentals around the University of Minnesota or University of St. Thomas. Maybe they are housing in certain cities that the investor knows well and can concentrate their rental management and move quickly on for new purchases.
Flagship Bank has extensive experience in financing Investor Owned Residential Real Estate so if this is an area of focus for you, please give us a call.
Multifamily is another a focal point of many investors around the Twin Cities Metro Area. Perhaps they look at number of units, age, quality or location of the building. Understanding the rental rates and expense attributes provides great insight into your ability to make your real estate investment a success.
Rehabilitation – Value Add Opportunities
There are investors that focus on rehab, developing or creating other value add opportunities within a real estate type and area. Some are called flippers, others developers, but the concept is the same. Finding opportunity to improve an existing investment real estate property to meet new demand or to reach new potential income sources that were not otherwise reachable under the property’s existing condition. We’ve helped over the years all types and enjoy seeing the before and after of the projects.
Triple Net Leased Properties
Probably the most common passive real estate vehicle. Triple net leased properties are where the tenant is responsible for the ongoing expenses of the property, including real estate taxes, building insurance, and maintenance, in addition to paying the rent and utilities.
Commercial Real Estate
Income producing commercial real estate like office, industrial and/or retail investments can also be a focused niche for a real estate investor. Often times located in a specific location that the borrower knows well, this investment real estate niche often provides good cash flow and consistent payments. However, keep in mind that it may carry much longer holding periods during times of vacancies and provide more limited liquidity options. Commercial property can potentially sit empty for many months or even years.