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Navigating Real Estate Niches: How to Find the Perfect Real Estate Investment Niche

Every investor needs a niche. Here's how to pick yours.

[Updated: Feb 04, 2021] Nov 11, 2020 by Tara Mastroeni
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One of the most common pieces of real estate investment advice given to new investors is to pick a niche, or a real estate specialty. You may be wondering what exactly a real estate niche is. We've created a guide to real estate niches. You'll learn what a niche is and why it matters, the different types of niches available to investors, and how to pick a niche of your own.

What's a real estate niche?

A "niche" is another word for an area of specialization. Often, real estate investors will choose an area of specialization to focus their investing efforts. This is particularly true for new investors who haven't had the chance to diversify their portfolios yet. However, even the most experienced investors will generally have one segment of the real estate industry they favor.

A real estate investing niche is different from a real estate investment strategy. While a real estate investment strategy is the method you use to make money in real estate, a niche is the particular investment vehicle where you apply that method.

For example, someone who wants to rent out residential real estate properties to long-term tenants would choose a buy-and hold real estate strategy and might focus on renting out single-family homes as their niche. Meanwhile, someone who follows a fix-and-flip strategy might focus on distressed properties in up-and-coming neighborhoods.

What are the real estate niches?

There are plenty of real estate niches to choose from. We've listed many of them for you below. While this is by no means an exhaustive list, it should be enough to get you started thinking about what niches might appeal to you.

Property-type niches

As a real estate investor, one subtype of niche you can look into is specializing in a particular property type. Here are the most popular types of investment properties:

  1. Single-family homes.
  2. Multifamily homes: Duplexes, triplexes, and quads.
  3. Apartment buildings.
  4. Condos and co-ops.
  5. Townhomes.
  6. Mobile homes.
  7. Raw land.

Commercial real estate niches

It may seem strange to separate out residential real estate and commercial real estate properties. However, commercial real estate tends to be its own animal. If you're thinking of going the commercial property route, you can choose from the following niches:

  1. Retail space.
  2. Office space.
  3. Industrial space.
  4. Self-storage space.
  5. Land.
  6. Real estate investment trusts (REITs).

Seller-type niches

You can also specialize in working with a specific type of seller. Usually, this subtype boils down to distressed properties, so it most often ends up being a fit for those following a fix-and-flip strategy. Here are some options:

  1. Short sales.
  2. Foreclosures and foreclosure auctions.
  3. Bankruptcies.
  4. Bank-owned/REO properties.
  5. Estates and probate.
  6. Disaster investing.

Renter-type niches

On the flip side, you can also specialize in the type of end renter you're hoping to find for your properties. In this case, your options include:

  1. Rent-to-own properties.
  2. Long-term rentals.
  3. Short-term rentals.
  4. Vacation rentals.
  5. Luxury rentals.
  6. Student housing.
  7. Government assistance/Section 8.

Locational niches

Finally, you can zero in on a specific location, such as a particular region of the country, city or town, or a particular neighborhood or school district.

However, a word of caution with going this route: If one real estate market falls into a downswing and your whole portfolio is within that market, it could take awhile for your investments to bounce back.

How to find your real estate investment niche

Once you have a better idea of what real estate niches are available to you, the next step is to figure out how to pick out which niche will work best for you. We've broken the process down into a few simple steps:

Get clear on your investment goals

Before you can pick out a real estate niche, you need to get clear on your investment goals. Ultimately, your objectives for your investment portfolio will help guide your choices for how you intend to invest.

For example, if your goal is to achieve financial freedom and you want to pick the most profitable niche, you might focus on commercial property, where the margins are often larger than in residential real estate. Meanwhile, if you're more interested in generating extra monthly income to help pay bills, you might want to invest in an apartment building, which will all but guarantee some extra cash flow.

Select an investing strategy

Next, you'll also want to select your real estate investing strategy. Often, the method that you choose to follow when investing will help you narrow down your niche options.

For instance, as mentioned above, those interested in flipping houses will likely want to focus on buying distressed properties. However, if you'd rather follow a buy-and-hold strategy that attracts long-term tenants, you may want to focus on buying residential property in good school districts.

Research your options

No real estate business plan would be complete without a lot of due diligence. So before you pick your niche, research the options available to you. Take some time to look online at the various niches listed above. If you need more guidance, one of the best things you can do is talk to a real estate professional, especially one well-versed in real estate investing.

Weigh the pros and cons

Once you have a little more knowledge under your belt, it's time to weigh the pros and cons of each niche. Every real estate niche will have its own advantages and disadvantages.

For example, investing in luxury real estate usually comes with bigger profits. However, it also comes with a larger upfront cost. Also, since luxury property is only suited for a specialty buyer or renter, you likely won't be able to do the same volume of transactions than at a different price point.

In the end, you need to evaluate what type of risk and reward you're willing to withstand with your Investments.

Make your decision

After you've weighed your options, you should have all the info you need to pick the real estate niche best for you. From there, you'll connect with a lender to discuss financing options and a real estate agent to look at available listings. Before you know it, you'll be on your way to buying your first investment property.

Remember: A real estate niche is not set in stone. If you don't end up liking the niche you've picked, you can always change it. In fact, you may end up picking a second niche down the road to diversify your portfolio.

The Millionacres bottom line

In short, picking a real estate niche will give you a sense of direction to help guide your future real estate investments, so give this topic some serious thought and consideration. This guide will help you pick your niche and get started building your portfolio from the ground up.

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