If you are looking for commercial real estate that will provide a stable income and is pandemic and recession proof, look no further than these three niches.
Niche #1: Apartment Investing
Why Apartment Rentals?
Pandemic Proof: During the pandemic, the news was reporting that apartment occupancy had plummeted and that rents went down. It isn’t true! Not only was occupancy stable but rents went up significantly and they are at an all time high right now.
Volatile Markets: In times of volatility in the housing market, apartment demand goes up. So when the housing bubble for single family homes does pop, the demand for apartments will increase and you will rent out your apartments until the dust settles. I’ve been through this market volatility three times and have benefited each time.
Low Supply High Demand: In the U.S we have an affordable housing shortage and developers can’t keep up. With inflation and supply chain issues that becomes even more challenging. This is why investing in apartments is such a great niche. Apartments will always be in demand because everyone needs a place to live.
How to Invest in Apartments
I’m often asked if it’s okay to start small in apartment rental investing, with a group of duplexes or fourplexes all together perhaps. The answer is yes, definitely. But don’t wait! Now is the time to invest. The market isn’t going to completely collapse and the longer you wait, the more you will pay.
I recommend you focus on B and C class properties and stay within five to fifty units because at that size you’re not competing against the large companies. When searching for your B and C class properties, you need look for value-add properties. The strategy is to find a property that’s been mismanaged or neglected, and purchase it. Then do some renovations and increase the rents. Over time you get the NOI higher, which forces the appreciation. Value-add properties are important because they provide the quickest path to financial freedom.
Further teaching on Apartment Investing:
How to Buy Your First Multi-Family Apartment Building
How to Upgrade from Houses to Commercial Real Estate
Niche #2: RV Parks and Mobile Home Parks
Why RV Parks?
COVID Proof: People want to go on vacation but they want to socially distance. An RV is the perfect solution. You can camp out, you don’t have to go to a restaurant and still have a beautiful family vacation. So, RV parks are in huge demand because the RV sales are through the roof.
Why Mobile Home Parks?
Recession Proof: There will always be the need for affordable housing. And as I mentioned above, we have an affordable housing crisis in America. People are turning to mobile homes as a solution.
Limited Competition: I like mobile home parks because most cities won’t allow you to build new mobile home parks. Which means once you buy it, there won’t be brand-new mobile home parks competing against you.
Stable Demographic: There will always be a demographic that can’t afford to rent an apartment or purchase a home. Right now, that’s a significant demographic in America. So, there will be a continual demand for mobile homes.
How to Invest in RV Parks and Mobile Home Parks
When looking for properties in these two commercial real estate niches, stick to family-owned mobile home parks and RV parks. Don’t pursue the big ones owned by large companies. Your interest is in “Average Joe” parks and it’s important you deal directly with the family.
Further teaching on Mobile Home Park Investing:
3 No-No’s of Mobile Home Park Investing
Mobile Home Park Investing for Beginners
Niche #3: Storage Facilities
Why Self Storage?
Demand in Younger Generations: Millennials are waiting longer to move from their apartments to single-family homes. But they still need extra storage space and are throwing their gear into self storage facilities.
Recession Proof: Self storage is a great niche for today because they are in demand in this volatile market. When the economy is in decline, people downsize and they need to store their stuff in storage facilities. On the other hand, when the economy is good, people buy more things such as outdoor equipment and they need a place to store those earthly treasures. Nothing is totally recession proof, but self storage has weathered the storm quite well.
People Have More to Store: Never has it been so easy to purchase things through retail providers and people then need someplace to store it. So, Amazon and the likes of them are one reason why the self storage industry is exploding.
How to Invest in Self-Storage
Purchase Properties with Expansion Potential: Search out properties that have a piece of land with level dirt where you can add more buildings or more pavement.
Focus on Smaller Storage Facilities: When investing in this niche, you need to focus on mom and pop sized properties. Don’t mess with the big guys who want the expansive, modern facilities because they can pay all cash and you can’t compete with them.
Use SBA Lending: Small Business Administration lending will allow you to put down 10%. Often SBA will even finance the expansion potential, sometimes with no money down.
For more on Investing in Self-Storage:
