Residential Real Estate in 2018
A Look at the Current Residential Real Estate Market in the United States
Historically, residential real estate is one of the most sound investment decisions one can make. Even in 2018, when everyone is worried about a residential real estate market bubble, it can be a solid investment—if you’re smart about how you do it. But you can’t be smart about investing in the residential sector if you don’t know the basics.
In order to capitalize in 2018, you need a clear lay of the land so you can invest intelligently. You should carefully study your local residential real estate market, from population trends to construction, as well as how quickly houses are selling. All of these things can give you a sense of the market, both currently and in the immediate future. Specific combinations, such as population growth rates that are faster than construction rates, can suggest your residential real estate market is developing in a way that might encourage property values to rise.
The residential sector carries a lot of indicators you can look towards to spot trends and market moves (which is a major key for how to make money in residential real estate). But you can’t make good use of any of that information unless you know the strategies and properties that will work best for your own investing goals. Let’s take a few minutes to break down the residential real estate market and how to make money in residential real estate.
What is Residential Real Estate?
Let’s just start with a simple definition of residential real estate.
Residential real estate is real estate that isn’t used for business purposes.
There are two major types of real estate: residential and commercial. Everything that is used for business purposes is—you guessed it—commercial real estate. You probably have more contact with commercial real estate on an average day, because it includes retail spaces, movie theaters, hotels, factories, and even apartment buildings. Every mall and every restaurant you’ve visited is a piece of commercial real estate.
You’d be correct to say that just about everything that isn’t used for a business counts as residential property. Even if you’re using a residential property as an income-producing one, it’s a residential property. Before we learn how to make money in residential real estate, we should look at the residential real estate market.
The USA’s 2018 Residential Real Estate Market
If you’ve recently read about the residential real estate market, you’ve probably heard “2018 housing bubble” mentioned more than once.
We hate to burst your bubble, but they’re right. In the past ten years, prices in most major residential markets have risen—to a point in 2018 where many homes are actually worth more than they were before the housing market crash. Now, this doesn’t necessarily mean on its own that we’re ready for a dip. However, the presence of other key market indicators has made many real estate experts worried about the possibility of a housing market crash, which isn’t something to take lightly.
Probably more likely, some major markets may experience isolated market dips depending on their own blend of market factors. Given the uneven nature of the housing market in 2018, investors must do twice the work if they’re looking to succeed. There are still plenty of opportunities to capitalize on the residential real estate market, but success starts with picking the types of residential real estate that are right for you.
Types of Residential Real Estate
Even within the residential real estate market, there are many types of residential real estate out there to choose from. To succeed in the residential sector, you need to learn the key differences between them. Understand how the types of residential real estate differ from each other and you just might be able to turn a profit!
Different types of residential real estate:
- Single-family residences – The most common property type, which just supports one dwelling and no shared, common areas. If your family owned or rented a home growing up, you probably lived in a single-family residence! A growing family may choose a small single-family residence over an apartment in the same market for the extra space.
- Multi-unit properties – Small complexes containing up to 3-4 units, with or without the owner living in one of the units. For someone looking to get hands-on with property management, multi-unit properties make a strong case. Note: These don’t include apartment complexes, which are their own beast altogether. Apartment complexes are typically considered commercial real estate.
- Manufactured/modular homes – These homes are standardized, manufactured, and either on wheels or transported on a trailer. Mobile home parks and manufactured home communities comprise fairly popular types of residential real estate. And they may often be cheaper than comparably sized single-family residences.
- Condos – Standalone structures or purchasable apartments that have access to common areas owned by all residents of a complex. You can gain some serious benefits from a condo, from a pool to a gym—and even events hosted by the complex. Conversely, you may deal with some of the drawbacks of apartments (even a noisy neighbor). However, consider condos as types of real estate because they are single, purchasable units intended for residential use.
- Townhouses – Single-family dwellings adjacent to near-identical units, which generally all have two floors. Typically, townhouses carry the benefits of a housing community as well as the drawbacks, similar to condos. Because they are types of residential real estate, they may even have their own HOAs.
Now that you know the major types of residential real estate, let’s cover how to make money in residential real estate.
How to Make Money in Residential Real Estate
If you want to learn how to make money in residential real estate, you need to plan your path carefully. Perform research, learn about your residential real estate market’s factors, assess your financial situation, and determine your financial goals.
For example, revitalizing a single-family residence then selling it—also known as a “fix-and-flip”—could be smart in a growing neighborhood. Or you could purchase a home, make some repairs, and hold it as a rental property for a few years.
Another example: Perhaps a different area is experiencing an influx of young professionals. Try condominiums or townhouses, as these types of residential properties are popular targets for young professionals. You can capitalize on low vacancy rates as the neighborhood develops and values rise. When you choose to sell, you may just recoup your investment with a little extra on the side. And that’s precisely (one way) how to make money in residential real estate!
Understand Your Income and Costs
Your preferred income impacts your target property type. Flipping a home could offer a lump sum down the line, even if it takes a little while. Meanwhile, a rental property could be preferable if rent in your residential real estate market is rising. In either case, you can choose what works best for you and your long-term goals. How to make money in residential real estate comes down to your own goals and the types of residential real estate in your residential real estate market. Depending on the market, you might not gain as much benefit by refurbishing a townhouse as you might by roofing a home.
The residential sector can offer many opportunities for young investors to get a foothold and turn a profit—even in 2018. With numerous types of residential real estate out there to choose from, you can almost certainly find something that will be right for you. Whether it’s single-family or multi-family real estate, you can profit! The trick? Don’t rush in. To reach your real estate investing goals, you must research carefully, understand your local residential real estate market, and actually learn how to make money in residential real estate.