If property investment trends tell us anything, 2016 is going to be a great your for real estate investors. I can say with confidence that 2015 was the best year real estate has seen prior to the onset of the last recession; circa 2007. However, there is nothing to suggest the barometer wont continue to build off of everything that transpired last year. For all intents and purposes, experts share the same sentiment: 2016 should outperform its predecessor.
Let’s take a look at seven of the property investment trends I expect to dominate sales over the course of 2016:
1. “Ugly” Single-Family Homes
You know what they say; one man’s trash is another man’s treasure. While a little cliché for my liking, this concept holds more weight today than you may have realized. However, real estate investors have taken this concept and run with it in a viable, money producing way. With a few exceptions of course, I could almost argue that the “uglier” the home, the better investment opportunity it presents. As long as it doesn’t need anything more than a cosmetic face-lift, it is relatively easy to transform an unattractive property into the most desired home on the block.
Truth be told, ugly houses aren’t for everyone; there are those content on relegating them to the trash heap. It’s not uncommon for investors to pass on purchasing a home if it looks like too much work, which would explain why there are still plenty of distressed, “ugly” homes on the market. People simply don’t want to take on the problems they may present. Those with the foresight to uncover a home’s true potential, however, could be rewarded.
Again, there is still a sizable pool of deeply distressed, abandoned homes across the United States. With a little due diligence, it is possible to uncover great returns. Do your homework and discern which properties others are passing on that you may capitalize on. The 2016 investment trends could surprise you.
2. Recently Renovated Homes
Those that don’t want to deal with major rehabs, structural issues, code violations, and ugly houses can always look somewhere else. Recently renovated homes, for example, offer attractive returns for a relatively minimal time investment.
Yes, the new rehab will be priced into the acquisition cost, but these homes can start producing money faster, with less risk. It may be possible to find these properties before the competition by targeting recent sales, pending sales, and properties in the middle of renovations.
Savvy investors have already discovered that recently renovated homes are perfect for turning into rental properties. From the moment they are acquired, they can be leased and start producing income in the form of rent. That said, it is entirely possible for landlords to pay down their mortgage with the money they are producing from renting out their property.
3. New Construction
Many real estate investors cringe at the thought of buying new construction properties. Yet, others find them to be one of the easiest and most comfortable ways to pick up deals. They are great prospects for flipping, but even more so for renting out. New construction can be overpriced, can result in idle capital, and sometimes comes with a lot of competition for tenants. However, for other investors, it is the easy route. Quality units can be fast to rent, can last longer, and may be flipped quickly with great margins if they were purchased at pre-construction discounts.
4. Vacant Land
Raw land investment, acreage, and in-fill builder lots may not be exciting for every real estate investor, but they can certainly coincide with a lot of promise. They can be flipped, auctioned off, built on, leased, or sold to developers. And 2016 may be the best time to get in on these deals, as prices look like they will keep rising. That said, builders are looking for space, and some land owners have been sitting on their overpriced lots for years. A good negotiator could make some fast deals happen in such a landscape, either by flipping, or putting up new, affordable homes.
5. Manufactured & Mobile Homes
2016 investment trends are shifting, and don’t necessarily need to favor investors alone. There is a growing need for affordable housing in the United States. That need is only going to keep getting bigger if we don’t do anything about it; and by we, I mean real estate investors. In fact, not only can affordable housing help those in need of it, but it is also a viable exit strategy. They can be harder to finance for a number of reasons, but normally require less capital due to their prices. Many investors may also be surprised at how attractive the cash flow on these properties can be. This is a popular niche for multi-billionaire real estate investors Warren Buffett and Sam Zell. It’s only a matter of time until its popularity increases exponentially.
Like new construction, condos and other HOA properties are typically better kept than their ugly counterparts. With the exterior maintenance handled by the association, condos can make for easy-to-manage rentals and seasonal vacation rentals. During boom times, investors may be able to acquire whole rental buildings and convert them to condos. Their applications are widespread, and allot savvy investors a number of ways to complete an exit strategy. I personally like how flexible condos can be. They can be flipped like any other property, but it is entirely possible to rent them out during poor market conditions that favor leases. The challenge for most investors, however, is dealing with the HOA. They are becoming tougher than ever to work with when it comes to approving sales and tenants.
7. Multifamily Properties
There are two classes of assets for real estate investors to choose from in this sector. There are small, 2-4 unit properties, and those consisting of five or more units. The ladder is considered to be commercial real estate, and thus falls under a different set of rules to abide by, but is nonetheless an option. Commercial properties, for that matter, tend to have a lower cost per unit, and can be streamlined by a property management company relatively easily. Smaller multifamily properties, on the other hand, can be a great opportunity to break into the real estate world. They are pretty easy to finance with high LTV residential loans.
There are many property investment trends for real estate investors to choose from this year. If you are hitting a roadblock on your current path, consider diversifying into another property type. You never know what you may be missing out on. After all, every deal you pursue shouldn’t focus solely on the physical property, but rather the numbers. Pay attention to the 2016 investment trends and you could be rewarded accordingly.