What Are the Best Types of Property to Buy For Income?

What Are the Best Types Of Property To Buy For Income?
Finding the best type of property to buy for income can be a daunting task, especially for the novice. While it may seem, to the uninitiated, that return on investment is the main criteria, there are many other items that need to be taken into consideration. Before you begin your search, you should ask yourself the following questions:

� How much money do I have to invest?
� Is my credit good enough to get a loan?
� What is my level of risk tolerance?
� Do I have any experience with rental properties?
� Do I want to manage my own property or hire a manager?
� Am I able to perform my own maintenance, or will I hire it out?

Once you have determined the answers to those questions, your next step is to find a professional real estate agent. Be sure to choose one that has experience with investors and investment properties. An agent who owns income property is your best bet, as he will understand all of the nuances involved.

Next, you will want to decide which type of income property to buy. Here are some of the different types of properties you might choose:

Single Family Home

This is probably the most common type of investment property and one of the easiest for the novice investor to start. You simply buy a home and rent it out.

Duplex

A duplex can be described as two single family homes stuck together. It is usually less expensive than buying two separate houses. Some people choose this option because you can usually rent out one side for enough to pay the expenses, and the rent from the other side is profit. Problems can arise if the two tenants don't get along.

Small apartment house

These typically range in size from 4 to 10 units. When they are all in the same building, you have the advantage of less maintenance. Instead of 4 - 10 roofs and yards, there is only one of each to maintain. If one or two apartments become vacant, you still have the income from the occupied units to pay the expenses. Be aware, anything over 4 units in most areas will be considered commercial property and different rules apply for financing, check with your mortgage broker or financial institution first.

Large apartment house

If you have the money to invest, a large apartment house can be a good source of income. Again, a few vacancies will not break the budget and maintenance per unit typically decreases as the number of units goes up. With a large apartment house, you will probably need to hire a full time manager and one or more maintenance people. The more amenities the complex has and the better the condition of the apartments, the more you can charge for rent. With more units, even a slight increase in rent per unit will net a substantial increase in profits.

Commercial Property

There are more kinds of commercial property available than can be listed here. They range from small stand-alone stores to storage facilities to large shopping centers and office buildings. When people see a stand-alone business, they sometimes assume that the business operator owns the land and the building. This is not always the case. Many business owners rent the building and property where their business is located. A commercial property with a long-term tenant can be a lucrative investment.

Other Income Properties

Sometimes, good income property is in places we might not think of looking. For example, fortunes have been made simply by buying mobile homes and renting them out. Mobile home parks have been referred to by some investors as "cash cows."

Vacation condos can also be a good source of income if they are located in a busy tourist area. Even vacant land can, in some areas, be rented out to farmers or for grazing cattle. In some large cities, where parking is at a premium, garages are often rented.

There are many other types of income property that are not readily apparent. This is where a knowledgeable real estate agent is essential. He can help you search through all of the possibilities and find the one that is right for you. Buying income property can be your ticket to financial freedom.
 
Daniella Aitken

Daniella Aitken

Sales Representative
CENTURY 21 Miller Real Estate Ltd., Brokerage*
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