If you've ever scrolled through rental listing platforms, then you know that there are several rental property types that can appeal to various target markets. It's your responsibility as a real estate investor to assess which property type would suit your needs.
Other than considering crucial factors before deciding, you must first know your options, and not just general rental investment property types. Under categories like single-family homes and multi-family properties, there are niche property types that can be lucrative in Nashville.
Key Highlights:
- Nashville offers profitable niche rental opportunities beyond traditional single-family and multi-family properties.
- Corporate rentals and student housing provide strong demand, but require flexible leasing and planning for turnover or seasonal vacancies.
- Pet-centric rentals and luxury micro-apartments can command higher rents, with trade-offs in maintenance and upfront costs.
- Eco-friendly and energy-efficient rentals appeal to modern tenants, offering long-term savings despite slower returns.
- Success depends on choosing the right niche based on location, financial viability, management capacity, and long-term goals.
Niche Property Types:
Short-Term Furnished Corporate Rentals
Unlike vacation rentals, traveling professionals, consultants, and executives on temporary assignments tend to stay in corporate rentals much longer. Tenants tend to stay for a month, but some extend their leases and stay for up to six months. This means you need to provide more flexible lease options.
Pros: Corporate real estate rentals fetch higher rental rates than traditional long-term leases, which means you'll have a higher rental income for a shorter amount of time. It will be quicker to stabilize your cash flow to recover from vacancies.
Cons: Since stays are temporary, you are required to furnish the rental property, which means higher upfront costs. Furthermore, there's a higher turnover rate, which means you have to market your rental property more often.
Student Housing
Nashville is home to several well-known colleges, such as Vanderbilt University, Belmont University, Lipscomb University, and more. This gives you a wide tenant pool of students to market to, and you can expect market demand for affordable housing options to always be high.
Pros: The college population in Nashville consists of tens of thousands, many of whom are looking for affordable housing or just apartment buildings in general. Parents can also co-sign lease agreements, offering better security.
Cons: While the demand is high, you will have to price competitively, considering your target market's potential unemployment. You may also experience seasonal vacancies during the summer months. While that's manageable for single-family homes, it can be problematic for multi-family rentals.
Pet-Centric Rentals
A lot of pet owners are always looking for rentals that can accommodate their furry friends, and some are very picky when it comes to pet policies in a rental. Although pet-friendly, some options still have strict rules that limit pet movement around the property.
Pros: You will have access to a wider tenant pool, and you can charge pet rent and fees to cover potential damages. This is among the most profitable rental property types, given how pet owners are willing to pay more for their fur pals.
Cons: There will be higher maintenance and cleaning costs, along with increased wear and tear on your residential real estate. If you own a multi-family property, you may receive noise complaints from other tenants, making property management harder.
Luxury Micro-Apartments
Luxury rentals are among the most profitable rental properties in the real estate market, since tenants are willing to pay premium rents for high-end spaces. Despite having smaller square footage, having multiple rental units with luxury furnishings and amenities can be lucrative.
Pros: There is a strong rental demand in urban areas, ensuring consistent cash flow and stable rental income. The rental property investment is uncommon, which means you'll have less competition.
Cons: Since a high-end rental property requires you to include luxury amenities and furnishings, your upfront costs will be higher. The same can be said for mortgage and maintenance expenses. It can be a significant investment, especially in apartment buildings where there are several rental units to furnish.
Eco-Friendly Housing
The demand for energy-efficient housing has increased over the past few years, with potential tenants opting for rental listings that include eco-friendly amenities. It can be in the form of renewable energy sources like solar panels or smart features that allow energy conservation.
Pros: You can market to eco-conscious tenants or those who are looking for smart features in a rental. You may also save on energy bills brought by energy-efficient functions, and get tax benefits or rebates.
Cons: It might take a while before you see a return on your investment, seeing as energy-efficient savings tend to be long-term. It will also require specialized knowledge to maintain such features.
Rent-by-the-Room Single-Family Homes
Of all the types of rental properties, the property owners typically don't live in the premises. If they do, it would be in multi-family properties where they would have their own unit. With rent-by-the-room, a tenant would only be entitled to a bedroom, and the rest would be shared with the landlord.
Pros: Extra income can be earned to help cover home expenses and have a higher cash flow potential. Property management will be easier, and your income loss will not be as heavy.
Cons: You will share your home with someone you don't completely know, and they can end up damaging your primary real estate if you fail to screen them properly. As with other single-family rentals, you will also share utility usage with your tenant.
Factors to Consider Before Buying Real Estate
- Location: Certain types of rental properties can produce stable income based on the location. For instance, suburban areas would be a desirable location for single-family properties. Multi-family homes or apartment complexes would fare better in urban scenes.
- Financial Viability: Does the rental real estate's purchase price match the potential generated income? Account for operating expenses like property taxes, insurance, maintenance costs, utilities, and more.
- Financing Options: Some types of rental properties are harder to finance since lenders calculate the price vs. the potential generated rental income. An example of rental properties that can be difficult to acquire loans for is commercial properties.
- Property Management: Your real estate investment will suffer if you cannot manage it efficiently. Some landlords prefer to hire property management companies. Others use property management software to avoid active management, especially if they handle multiple units.
- Long-Term Plans: Your investment strategy should factor in your plans for the future. Do you intend to focus on real estate investing? Do you have plans in place to increase rental income? Will you eventually scale your portfolio to have multiple income streams?
Rental Property Types FAQs
Are residential properties more profitable than commercial properties?
- That depends on the local market and the type of investment property. Residential and commercial spaces can both be income-producing real estate under the right circumstances.
Are multi-family homes harder to manage?
- They generally are, seeing as you will have to oversee multiple tenants. However, there are solutions, such as hiring property managers or using property management tools to streamline operations.
Which property type is best for first-time real estate investors?
- Single-family homes are generally good options, since they are easier to finance and manage. However, you should still check the rental property market to make an informed decision.
What Kind of Freedom Can Property Managers Give?
Many landlords choose to hire property management companies to achieve the freedom to explore other opportunities, such as scaling their real estate portfolio or gaining more personal time. That's what we, here at Green Tree Property Management, are prepared to offer you.
Our comprehensive services will not only make you a stress-free landlord, but we can also help you maximize your rental income.
Feel free to ask us about our property management services. Schedule a free consultation now!
