3 Ways Residential Investment Property and Traditional Residential Property Differ
If you are looking into becoming a real estate investor in Fort Myers, it is important to recognize the differences between the types of properties that you can invest in. Florida investment property can provide a lucrative, rewarding investment opportunity with a strong market and Fort Myers real estate agents can help you navigate the market and learn about the different real estate property types in the area that fit your needs. In this article, we will discuss the differences between residential investment properties and traditional residential properties and what to look for in an investment property.
What is a Residential Investment Property
Residential investment properties include any investment property that is purchased with the intent of generating income through residential tenant rentals. This may include single-family homes, multi-family homes, or condos.
In general, these properties are obtained by searching for a property that is in an ideal location for renters, evaluating potential income, determining the cost to make the property rental-ready, purchasing, renovating, going through the compliance process, and finally, marketing the property to renters.
In addition, these properties are commonly offered for long-term rental terms meaning one tenant will live on the property for 12 months or more. Any property with more than five units is not considered a residential property because of the higher potential return on investment. Instead, they are considered commercial property.
What is a Traditional Residential Property
A traditional residential property is a property that is purchased with the intention of the owner to use it as their place of residence. In terms of real estate, residential properties are considered any building with less than five units that are intended to be used as a living space. However, once an owner begins making a profit from the property and does not reside on the premises for at least a portion of the year, it is considered an investment property rather than a residential property.
While these properties are generally similar in many ways including zoning, local compliance laws and regulations, and use purposes, there are a few key differences between residential investment properties and traditional residential properties.
These differences include the following:
- Use of the property: If an owner collects rent in exchange for residency at the property it is an investment property, however, if the home is used for the sole use of the owner and their friends and family, it is a traditional residential property.
- Financial obligations and proceeds of the property: If the property is used to turn a profit in any way or certain tax deductions are claimed, it is considered an investment property.
- Management of the property: If a property is managed by a third party who has control over occupancy in any way, it is considered a rental property.
What to Look For in an Investment Property
Technically, there is no specific difference that an investor should look for in a traditional residential property versus a residential investment property. There are, however, factors that should be considered when determining if a property is right for you. This might include things such as the neighborhood, property taxes, schools, crime, job market, amenities, future development, vacancies, average rental rates, and natural disasters.
Now that you know the difference between a residential investment property and a traditional residential property, you should have an idea of which one is right for you. Contact a Fort Myers real estate agent today to find out more about the options available today!