Most Profitable Niche Real Estate Investments You Haven’t Tried

The Big Picture On Profitable Niche Real Estate Investments:

• • Consider strategies such as flipping rentals to hedge funds, investing in mid-size properties, or focusing on large apartment buildings for diverse opportunities.
  • Niche markets like office real estate, self-storage facilities, and mobile homes can offer unique advantages and cash flow potential.
  • Diversifying across multiple real estate niches or specializing deeply in one can both be effective strategies, but be prepared to adapt as market conditions change.

Everybody understands the business model behind flipping houses, long-term rental properties, and short-term vacation rentals. Most of us have rented a home or two ourselves at some point in our lives.

But what about other niches in real estate investing?

They say, “The riches are in the niches.” If you want to skip the crowds and competition, consider some niche real estate investing tactics for higher returns and fewer headaches.

1. Corporate Rentals

We periodically meet with Al Williamson to discuss tips for vacation rentals and Airbnb. However, his favorite strategy is medium-term corporate rentals in the 2-6 month range.

Here’s how it works: You furnish the property, but instead of renting it nightly on Airbnb, you market it to business travelers. These are people like travel nurses who need fully-furnished housing for a few months.

The employer typically pays the rent, so you have virtually no risk of defaulting on rent. And the renter treats the property well because they don’t want to get fired over a damage bill.

Employers pay above-market rents for furnished units leased for just a few months. That alone boosts your returns and cash flow.

Best of all, you don’t even need to own the property. You can sign a long-term lease agreement with a landlord as the renter, furnish the unit, and then sublease it to a corporate renter. That means you don’t have to make a down payment and don’t have to pay for repairs or maintenance either.

Known as rental arbitrage, check out our webinar with Al Williamson, in which he explains the business model in detail.

Corporate Rental Essentials

For added tips, below are some of the most significant essentials about renting your property to corporations.

2. Flip Rentals to Hedge Funds

John Riedl, founder of EasyCash Offer Florida, has a unique spin on flipping houses. “My real estate career has evolved over the years into a systematic online method, purchasing residential single-family homes and quickly reselling them online via a real estate hedge fund.

“I buy turnkey properties in cash — there is no real estate leverage involved. They are purchased with a renter and professional property manager in place, and transferred via a reputable title business, which provides me with title insurance and peace of mind. Each investment property costs less than $100,000: this is comparable to 1970s prices. They generate 9% net yield each year (cap rate), so even if I do not resell them, they generate a respectable rental cash flow.

“I can easily leverage them if I like. In fact, certain institutions will bundle them ten at a time. If I leverage them, the terms will be 80 percent loans with an interest rate of less than 5% fixed for 30 years. Cash-on-cash returns on average exceed 14% per year when leveraged. When depreciation, appreciation, principal paydown, and other factors are included, the return on investment averages 40%+ per year.

“The best part is that I don’t have to wait because I have a real estate hedge fund that purchases them directly online and posts them for acquisition by individuals seeking financing. Buyers who take out rental property loans pay a premium for properties at 8%+ cap rates. The entire procedure is completed online, and the property is resold for a higher price in less than three months through a title business. The capital gains and income yield generate cash returns of 40%+ each year.

“It is the only business concept I am aware of for earning money online in real estate in a hands-off, hassle-free manner (and with low downside risk).

“The critical point is that you buy properties at a discount by making cash offers. Then the real estate hedge fund finds another buyer who gets a rental property loan and pays more than you did, because they earn higher cash-on-cash returns due to the financing.

“It’s all done over the phone and email, and you wire the title company $100,000 as described above. A few weeks later, you receive an email from the real estate hedge fund informing you that another buyer has opened escrow and is paying you $112,500. You then sign again to release the deed and receive the $112,500 back (all through DocuSign online).

“Your net profit would be less than $12,500 because you would have incurred closing charges for the purchase and sale, as well as a 1% commission and a 1% website posting fee.” That’s still less than a real estate agent’s commission, though.

“Your net would be around $8,500 or $9,000 and you can repeat this process as often as you like — which generates well over 30% annualized even if it takes them four months to resell each of your properties. This is even more profitable because you own the properties and thus receive all rental income, which generates another 9% annualized. My annual returns online through them have been around 40% and in my experience, it has never taken them more than three months.”

3. Buy Properties Through Probate

When property owners pass away, their children are often left with a dilemma. In many cases, these heirs don’t want to keep their parents’ rental properties or even their primary residence. As a result, they frequently decide to sell these inherited properties, often in a rush to settle the estate.

This haste is understandable, given the complexities of probate. For many heirs, the entire process can feel like a burdensome headache, and they’re eager to wrap everything up as quickly as possible. However, this urgency creates a unique opportunity for savvy real estate investors.

You step in and offer to settle quickly, with no muss and no fuss. Many heirs would rather have a lightning-fast closing than a full-price offer at market value.

Read up on probate real estate investing here, and check out my conversation with Sharon Vornholt about her probate investing strategy. She’s been operating in this real estate niche for over three decades, teaches a course on it, and coaches students through buying properties in probate.

4. Diversified Mid-Size Properties

What if you didn’t specialize in a single niche in real estate but instead focused on deal size?

​​Keith Nelson, CEO of Dual City Investments, found a property price sweet spot. “After several years of seeing every private and public real estate company flood into the multifamily niche, we quickly realized we needed to pivot. We formed a blind pool fund whose only niche was to concentrate on middle-market deals between $2-5 million dollars, no matter the asset type or area. We chose this range because we could come in under the radar of larger REITs and funds but be more aggressive than the smaller investors. Of course, we would do extensive research on different assets and markets, enough to get comfortable with the deal and have several real estate exit strategies.

“Concentrating on that middle-market price range and being flexible on the asset and area gave us a very diverse and well-rounded fund that thrived through the COVID pandemic. Our philosophy is that flexibility and agility are more valuable than specialization unless that real estate niche is so specialized that the competition is scarce, but that is rarely the case for any length of time in investment real estate. The real estate market is cyclical, and inside of that larger market cycle, the asset classes, as well as geographical areas, are independently cyclical.

“A few of the factors that can affect the niche are shifting demographics, local economies, industry entering or leaving areas, and the cost of construction. It is great to have a niche and become knowledgeable in that one area, but it is better to be knowledgeable in multiple areas and be able to move and flow with all the different cycles investment real estate contends with.”

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5. Large Apartment Buildings

“My real estate niche is large apartment buildings,” explains George Beatty, founder of Problem Property Pals. “The larger a building, the more chances it has of helping an owner earn money. Earning income from many units to pay for one roof, one parking lot, and one crawl space is enough incentive. It also opens up the opportunity of multiplied cash flow from many units. Due to the high price point, investors finance these beneficial properties with a combination of commercial loans and collect money from partnerships. Real estate investment trusts (REITs) and other large organizations focus on these property types.”

The more expensive the building, the fewer the competitors who can afford it. That can drive up cap rates and returns, by keeping the purchase price low relative to the revenue.

And they’re easier to finance than many investors believe. “These vast complexes are tailor-made for easy financing and earning good money in the process,” Beatty adds. Lenders like RCN Capital and Commercial Loan Direct cover up to 83% of the purchase price.

You don’t have to buy these properties by yourself or hassle with financing, tenants, contractors, or any other headaches of active real estate investing. In our Co-Investing Club, we all chip in small amounts to invest in large apartment buildings. As fractional property owners, we get all the benefits of owning real estate without any headaches of being a landlord. 

6. Get Into Hospitality Properties

Speaking of large buildings, a well-maintained hotel or a motel in a prime tourist destination can generate high returns, especially during peak seasons or holidays.

However, your success in this real estate niche primarily depends on maintaining consistent occupancy rates. For example, boutique hotels in urban areas may be popular among millennials seeking unique experiences, while extended-stay properties near corporate centers appeal to business travelers. 

If you’re interested in entering this niche but can’t afford to buy or build a hotel, which is true for most of us, there are other ways to get started.

You could partner with others to invest in a larger property, or better yet, invest in real estate syndications where you can own a portion of different types of properties, including hotels. Another option is to invest in Hospitality REITs, which let you own a share of hospitality properties, including hotels, without managing them directly.

Some people also start by investing in vacation rentals or bed-and-breakfasts to learn the business before moving on to larger hotels. After all, starting small is the safest move in every investment.

7. Office Real Estate

Teresha Aird, co-founder of Offices.net, makes a strong case: “Reports of the demise of the office are greatly exaggerated.

“Changing workplace demands and the rise of remote working models haven’t killed the office. Instead, they’ve transformed commonly held notions of ‘traditional’ workspace and supplanted them with a more free-flowing, flexible alternative. Offices are no longer places where people go to work and work alone. Companies looking to attract top talent are now selling the idea of an all-encompassing workplace ‘experience,’ one that marries in-office and remote schedules with networking events and collaboration that pivots between the virtual and physical worlds at the drop of a hat.

“What excites me about commercial real estate is its flexibility to deal with rapid market changes, something which has been borne out and proven since the start of the pandemic. Whether it’s offering 24-hour, 365-day secure access to your office space, or movable fit-outs and pods to accommodate varying social distancing requirements, the commercial sector’s flexibility is certainly what keeps it relevant, and the investor who moves with the times – successful.

“Yes, we’ve seen a drop in commercial tenancies over the past two years as a result of various lockdowns and public health measures. With the rapid changes and uncertainty in the market, however, there are opportunities inherent for the astute commercial stakeholder. What was once considered uncommon forms of work in our society — such as freelance, remote and hybrid positions; are now much more accepted, and even encouraged — especially by governments who want to keep economies bustling along, even when the streets and office corridors are barren.

“No small amount of bargaining power has shifted to the worker, who insists on flexible work arrangements to help facilitate a better work-life balance. In response to this pressure, many employers are offering flexibility in the positions they advertise, as well as the variability to work outside the traditional 9-5.

“The results of this radical change to traditional work have seen quite drastic changes in commercial property. More office spaces are being offered for short-term rental, as opposed to just long-term lease agreements. Coworking spaces are back in vogue, and traditionally partitioned gray spaces have rapidly morphed into trendy hybrid working hubs to accommodate a variety of workers. Commercial property investors who were quickly able to pivot, supplying what this emerging market demanded, have reaped the most benefit.”

8. Green Buildings or Eco-Friendly Properties

In recent years, environmentally conscious real estate investments have gained traction, and they cater to a growing market of eco-minded buyers and tenants.

What makes it a good niche real estate investment is that these properties, which include LEED-certified buildings and those with eco-friendly features like solar panels and energy-efficient appliances, often come with prices and attract long-term occupants.

Plus, eco-friendly buildings offer cost savings and tax deductions under IRC Section 179D.

REITs and crowdfunding can be your entry point without spending too much on capital. You can also retrofit your existing properties with eco-friendly features like energy-efficient appliances, improved insulation, solar panels, etc., and market your property as eco-friendly. Remember, these types of properties demand higher selling or rental prices.

9. Raw Land

Deni and I invest in raw land, along with her daughter Tara and her husband.

The business model is simple: We contact owners in tax sales and offer them a lowball sales price. We buy for low sums, often $1,000-5,000, and then sell the land for three or four times that.

Sometimes, plots are for sale for a year or longer. But without HOA plots, our only carrying costs are the extremely low property taxes.

Best of all, we avoid typical landlord headaches: tenant screening, maintenance, repairs, rent collection, regulations, and property management.

10. Trailers on Land

Mobile homes aren’t sexy, and neither is the kind of land that most trailers sit on. After all, in the world of real estate investing, what’s unsexy usually translates to higher returns.

Since investors aren’t clambering for trailer-laden land, you can often score excellent cash flow on these deals.  The gross rent multiplier of these deals is usually quite low. “Trailers offer lower buy costs and higher income from rents,” explains Michel Cocke, CEO of 253 Houses.

In fact, Deni and I interviewed an investor named Adrian Smude, who specializes in these deals. Check out the interview below. It’s a fascinating business model that yields high returns and low headaches.

Want to compare investment property loans?

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We compare the best purchase-rehab lenders and long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

11. Mobile Homes Without Land

You don’t have to buy a piece of land with a mobile home or a mobile home park. Why not buy a physical mobile home instead?

12. Self-Storage Facilities

Self-storage facilities distinguish between niche real estate investing and operating a traditional local business.

Your profit depends on occupancy rates and rents versus long-term expenses. But unlike  residential properties, you don’t have the regulation or hassles, such as the lengthy eviction process, rent control, squatter’s rights, or worries over Fair Housing lawsuits.

You also have a much simpler physical property to maintain without the complex plumbing and other mechanical systems required in residential homes. Again, self-storage facilities come with fewer headaches and often higher returns.

Of course, buying an entire self-storage facility by yourself might stretch your budget and, for that matter, your time. Consider Investing passively in self-storage real estate syndication for lower cost and no time commitment.

13. Parking Facilities In Busy Areas

Parking facilities are often overlooked, yet they can also be a profitable investment since they are essential in bustling areas. For example, a parking garage near Ohio Stadium can earn substantially during game days. In busy cities like New York, parking facilities can provide a steady income for people who work there.

This niche real estate is an appealing investment opportunity due to lower maintenance needs and staffing requirements, reducing overall costs. Also, newer solutions like vehicle detection systems and Tesla Superchargers for EVs can increase profits.

Getting into this niche starts with looking for areas where parking is in high demand. Once you’ve identified potential locations, learn about local building rules for compliance, and then go from there. Or, reach out to real estate agents specializing in parking structures — they can provide valuable insights.

But again, doing this with your own funds can cost a lot. Fortunately, you can start by investing in REITS, which includes this niche. This way, you can invest in parking structures without the substantial capital requirements of buying one outright.

Another option is to look for crowdfunding opportunities that focus on parking investments. You might also explore partnerships with more established investors or find smaller parking lots in up-and-coming areas. 

Or, if you’re in a busy city and your home has a spacious front yard, consider parking rentals.

14. Private Notes

No one says you must own real estate directly to invest in it.

Instead, you can lend money to other real estate investors, secured by a lien against their property. You collect passive income without needing to field 3 am phone calls from tenants or repair leaky toilets.

I provided a private loan to a couple with multiple rentals for flexible funding. They pay me 10% interest only, and either of us can close out the loan with 30 days’ notice. The interest arrives in my bank account every quarter without me having to think twice about it.

Make sure you only lend money to experienced real estate investors you know and trust. Just so you know, foreclosures and lawsuits to recover funds result in significant losses through legal and collection expenses.

Alternatively, you can invest in real estate crowdfunding platforms that lend to other investors. I particularly like Groundfloor and Concreit for this, and I invest my money in both. Groundfloor offers individual loan selection while Concreit provides pooled fund shares with 5.5% dividends and flexible withdrawals.

Final Thoughts

From small single-family rentals to enormous office high rises, every niche in real estate has its own pros and cons. The key is finding a real estate niche and business model that align with your goals, not seeking perfection.

Personally, I’d like to diversify into as many as possible. I own rental properties, real estate crowdfunding investments, private notes, and raw land.

Other investors like to pick one real estate investing niche and go deep, investing only in it. That strategy is fine as long as you’re prepared to pivot when those niche market conditions change.

Which they always do: no market is static, and the sooner you accept that the only constant is change, the better you’ll be able to adapt as the landscape shifts.♦

What’s your favorite niche in real estate investing? Why?

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