Real estate can add to your investment portfolio’s diversity, helping you achieve wealth-building goals. Whether it’s large payouts or steady returns you’re after, real estate investments have solid potential. Like other forms of investments, several ways exist to get in the game and expand your portfolio’s assets.
Single-family homes and apartment buildings may be the most relatable investments in real estate. But there could be other opportunities you’re missing out on. These types of real estate investments may be ones you haven’t considered or don’t even know about. Nonetheless, they can be more wise and profit-producing than you’d initially think. Let’s look at four of them.
1. Mobile Home Parks
Mobile home park investing can yield higher returns than most investors first realize. The overhead is usually lower than other residential real estate, such as condo buildings. As the investor and owner, you’re typically responsible for maintaining only the land the mobile homes sit on. This land includes common areas, such as the roads within the park and small playgrounds.
In addition, the demand for mobile home lots in most areas is high and steady. Factors like zoning restrictions for mobile home parks can work in your favor. These restrictions may limit the amount of land designated for mobile homes, making the parks you invest in the area’s leading contenders. There’s less competition from other properties, and the tenants who are already there are less likely to move their homes.
As Lifestyle Investing expert Justin Donald says, “When homes can’t move, you have owners who will stay in the area.” The longevity of the tenants in mobile home parks tends to be longer than with other residential real estate. With apartments, duplexes, and single-family homes, there will always be an array of attractive alternatives for renters. But mobile homeowners are invested in their properties and can’t just pick up and move.
For real estate investors, this reality makes for steady returns. Although mobile home park investing may still require some active participation, you can hire a property manager to help. With mobile home parks, you also have more lot spaces — units — to collect rent from. This makes increasing your earning potential easier.
2. Lesser-Known Commercial Properties
When you think of commercial real estate, hotels, and office buildings might come to mind. So might shopping centers, including strip malls. These properties can be great investments, albeit with larger upfront costs and heavy active involvement. Still, other forms of commercial real estate exist, such as warehouses and storage units, which may come with fewer headaches.
Despite the recent softening demand for larger warehouse spaces, rents continue to rise. Average net asking rents for warehouses were up 9.1% compared to the previous year. The average rent per square foot throughout the U.S. stands at $10.16. In addition, leasing activity for smaller warehouse spaces has kept increasing. These are spaces with less than 25,000 square feet.
Storage units are another type of commercial property you may not think about. The demand for these units has also tapered off since the pandemic. However, storage unit investments have shown more resiliency as the economy has cooled. February 2023 data shows self-storage real estate investment trusts traded at a discount to net asset value of less than 5%.
Compare this to overall real estate investment trusts, which traded at a discount to net asset value of 17%. Although storage units have shown greater resiliency during a challenging economy, dividend yields aren’t necessarily high. Dividend yields were around 3.3% in September 2022. Like Treasury bonds, these properties won’t necessarily result in large payouts. But they can help offset the risks associated with higher-yielding investments.
3. Undeveloped Land
Undeveloped land is an opportunity some real investors don’t consider because there’s — literally — nothing there. Without a building to rent, you might wonder how you’ll make a return. At the same time, the absence of buildings means you don’t have to maintain anything. Your costs to purchase undeveloped land can also be less because the value of developed properties isn’t built into the price.
The question here is what you’ll do with your investment. You can hold on to it and sell it at a profit to a developer eager to build commercial or residential properties. Naturally, you’ll get the best return if you scout out land in areas with high growth potential. Another option is to develop the land yourself, which may require rezoning. You’ll also have to put significant time and money into the project.
Yet another option is to lease the land for agricultural or non-development purposes. A company may want to use the land to host an event or film a commercial if it’s a smaller lot. Investors who buy and hold raw land typically wait until it has appreciated enough value to sell. With land investments, you’re looking for long-term gains instead of short ones.
4. Crowdfunding Platforms
Money and time are top entry barriers to real estate investing. If you want to start investing as a side hustle, renting out homes and buying commercial properties by yourself probably isn’t for you. Thankfully, there’s a newer way to overcome the typical barriers to adding real estate to your portfolio.
Online crowdfunding platforms allow you to combine your money with other investors. And you don’t have to manage the properties yourself. Crowdfunding is a passive way to start or expand your real estate investments. You can browse available properties on the platform of your choice and choose the amount you want to invest. It may be as little as a few hundred or a thousand dollars.
Over time, you can earn a share of the revenues produced by your investment properties. Once they’re sold, you’ll earn additional income. These may be properties across the country, including vacation rentals, apartment buildings, commercial spaces, or pieces of property close to home. Investment properties are an efficient way to invest in a mix of properties and not have to take on the responsibilities of managing them.
Real Estate Investment Opportunities to Investigate
Real estate investment opportunities can be more diverse than you think. There may be a hidden gem in a mobile home park, warehouse space, plot of undeveloped land, or crowdfunding platform. It all depends on your income goals and how much effort you will devote to a venture. The next time you’re looking for a property to add to your portfolio, consider those that others may not.
