The world of rental real estate covers many types of investment properties far beyond just the common path of residential apartments. Rental real estate refers to any type of investment property that generates rental income such as single family homes for rent, retail shopping plazas, and even vacation rentals on Airbnb. It can also expand into other real estate income generating opportunities such as cellular towers and billboards. Our ultimate guide below explains the many different types of real real estate opportunities available.
Rental Real Estate Definition
Rental real estate is any type of property that an investor leases to a tenant for the purpose of generating a profit.
List of Rental Property Types and Examples (14)
Rental property opportunities come in all shapes, sizes, and prices. They can be found literally in any market from a small town to a major city. Below is a list of the 14 most common types of rental properties.
Single Family
Renting out single family homes is one of the most stable and most low-risk types of rental property investments to get started with. The familiarity and perpetual demand makes this type of rental property great for aspiring landlords just starting out.
Multifamily
In residential real estate investing, multifamily rentals are the next level above single family rental properties. Multifamily rentals range from 2 units up to hundreds or thousands of units.
Commercial
Owning and renting commercial properties can be more challenging than other types of rental real estate, however, it can also be the most lucrative with potential for higher rents and minimal maintenance responsibilities.
Types of Commercial Rental Properties
Retail
A type of Commercial rental property, Retail real estate includes public storefronts such as shopping Centers, Malls, Plazas, Strip-Malls, and more in commercial corridors.
Office
A type of Commercial rental property, Office real estate includes buildings where administrative work usually takes place such as medical and professional services.
Industrial
A type of Commercial rental property, Industrial real estate includes buildings used for warehousing, manufacturing, and any other type of industrial economic use.
Vacation
Vacation rentals are a great way to generate income while enjoying a second residence. Popular short term vacation rental platforms such as Airbnb have made it easier than ever before to become a vacation rental landlord.
Hospitality
If you have ever gone on vacation and rented a room for the night, then you have stayed in a “hospitality property”. These properties primarily serve travelers and include various types of properties such as hotels, motels, lodges, cabins, and hostels.
Land
Land is one of the oldest and simplest forms of rental real estate. Renting land can vary by its location and use. Overhead of land ownership is often lower than comparable real estate investments, but still requires property taxes and maintenance upkeep.
Prefab Housing
Manufactured housing (also called Mobile Homes) refers to prefabricated housing that is assembled offsite and then transported to the site of use. Within communities of these mobile homes ( mobile home parks), spaces are rented on a monthly basis to place the home. They usually come with access to utilities, waste management, and other amenities.
Parking
The fundamental idea behind parking lots is to generate revenue by renting space for people to park vehicles. Parking lots can range in complexity from a simple open lot, to a multi-story structure with automated space counting technologies.
Self Storage
As an overlooked industry for many decades, self storage is now a highly sought after investment due to its low operational overhead and high customer demand. Storage facilities range from outdoor warehouses to multi-story climate controlled indoor facilities.
Senior Housing
As the human lifespan continues to get longer, elderly care needs continue to grow more demanding. While seniors can mostly live autonomously, they eventually start requiring occasional supervision or medical assistance. Senior housing mimics a regular apartment rental, but are priced at a premium for including amenities such as linen services, medication management, housekeeping, and entertainment recreation.
Student Housing
Universities and local community colleges across the country have students that are either relocating for school or large student populations that the school cannot entirely house themselves. Investors have been privy to this supply and demand of apartment rental housing close to campuses, and created a type of residential rental property investment class called “Student Housing” which specifically targets students.
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Other Types of Rental Real Estate Opportunities
Billboards
Mostly found in high traffic areas, outdoor advertising opportunities such as billboards can be a lucrative supplemental income source for rental property investors. Billboards allow owners to generate additional income without interrupting its normal use. Billboards can either be Bulletin-Style (i.e. printed on vinyl) or Digital (i.e. display screen). Overhead costs for billboards are usually minimal and may just require electricity for lighting and a digital display if applicable.
Cellular Sites
Cellular Sites are leased to rental real estate owners for additional income. Cell Sites can either be mounted to a structure or a freestanding pole (Cell Tower), and are electric communications antennas and equipment that provide signal surrounding areas for wireless communication devices. Cellular site leases can be very tricky to navigate and should be reviewed by a legal professional before signing to understand.
Food Hall
Food halls have been around for a while, but recently regained their popularity. A food hall is a collection of local mini-restaurants, food vendors, and food-focused shops. The concept is usually in an open-air style space that accommodates shared seating in the middle and also acts as an attraction/destination. Restaurant spaces are rented out to local chefs or start-up entrepreneurs and restaurateurs. Food halls are not to be confused with food courts. Food courts are usually populated by national-chain fast food restaurants. In contrast, food halls are curated with local, artisanal dining options.
Ghost Kitchens
As mobile food ordering apps such as Grubhub and UberEats grew substantially in popularity, so did the rise of ghost kitchens. A ghost kitchen (also called a virtual kitchen or cloud kitchen) is a professional food preparation and cooking facility that is rented out to restaurateurs for the sole purpose of food preparation for delivery-only meals (no storefront or indoor seating). The concept supports many of these micro-kitchens that all reside under the same roof to allow for economic overhead savings.
What is the Best Type of Rental Property for Beginners?
The best type of rental property for beginners often depends on individual preferences, goals, and resources. Some of our top recommendations for beginner investors include the following types of rental properties:
1. Single Family Homes
These are typically easier to manage, finance, and maintain. They are popular among renters, provide stable cash flow, and can appreciate in value over time. Learn more about Single Family rentals here.
2. 1-4 Unit Multifamily
Smaller multifamily properties such as duplexes, triplexes, or four-plexes are a good starting point for beginners since they allow for multiple rental units in one property, which can lead to better cash flow. Managing and financing these properties is also similar to single-family homes. Learn more about Multifamily rentals here.
3. Turnkey Properties
Turnkey properties are fully renovated, often with tenants already in place, which can save you time and effort. You’ll typically pay a premium for this convenience, but it may be worth it for those new to property management. Learn more about Turnkey rentals here.
4. Condos and Townhouses
These properties usually come with lower maintenance responsibilities, as the homeowners’ association (HOA) manages the exterior and common areas. However, be mindful of HOA fees and potential rental restrictions.
What Type of Rental Property Appreciates the Best?
There’s unfortunately no one-size-fits-all answer to which type of rental property appreciates the most. Rental property appreciation depends on many different factors such as location, market conditions, property type, and local economic trends. Below are 10 factors that can help you identify properties with higher potential for appreciation:
- Location: A property’s location plays a critical role in its appreciation potential. Proximity to amenities, good schools, public transportation, and employment centers can increase demand and drive up property values.
- Supply and Demand: The balance between the number of properties available for sale or rent and the demand from buyers or renters can impact appreciation. Limited supply and high demand generally lead to increased property values.
- Economic Growth: A strong local economy with job growth, rising incomes, and low unemployment rates can boost demand for real estate, leading to higher property values.
- Infrastructure Development: Investments in infrastructure projects such as roads, public transportation, and utilities can improve accessibility and make an area more attractive, leading to increased property values.
- Neighborhood Improvements: Revitalization efforts, new developments, and an influx of new businesses can positively impact property appreciation by making the area more desirable.
- Population Growth: An increase in population due to immigration or natural growth can create a higher demand for housing, driving up property values.
- Interest Rates: Lower interest rates can make rental property mortgages more affordable, increasing the number of potential buyers and driving up property values.
- Market Cycles: Real estate markets are cyclical, with periods of growth and contraction. Understanding the current phase of the market cycle can help investors identify when appreciation is more likely.
- Property Condition and Upgrades: Well-maintained properties with modern amenities and upgrades can appreciate faster than properties in poor condition. Value-add improvements can significantly impact property values.
- Government Policies: Tax incentives, zoning regulations, and housing policies can influence property values. For example, policies that promote homeownership or restrict development can lead to increased demand and higher property values.