Real Estate Investor · Richmond, VA · Member since 2008 · 5 posts · 0 votes
If you have a niche market idea (i think mine will probably cost more than standard rehabs) would you focus solely on this, knowing your business might grow slower than if you didn't have a niche- or should I just try to by SFH and renovate to generate cash flow and get experience?
Anyone have or know or any niche markets? Is it smart or dumb to focus on rental units a little nicer than typical?
You are going to get a lot of different opinions on this.
As to the niche, if you have identified that your niche idea has more profit potential than another niche or being general, pursue it.
As to the rentals, for most of my investing career I have targeted being a little above the average in the area. I always wanted to be the landlord of first resort, not last. It is harder to do this and it takes a lot of planning but I run my investments like a business and this is the way I maximize the profits for myself and my partners.
The purpose of owning a business is to make money. Operating in a niche segment of the business may allow you to operate without much competition, but a niche may can also be so small as to prevent you from making the money you want or need. For example, if my niche was buying only purple houses, I might be able to essentially corner that market, but there many be little or no money to be gained from doing so. So, the real question is whether operating in a niche gives you an advantage and thereby allows you to make more money.
It all depends on the niche. However, I think it's extremely important to do. For example, my niche is targeting tired landlords and purchasing the property sub-2.
Too many new investors try to do it all (short sales, rehabs, etc.) and they never become pros at one method.
I think it depends on a)the niche, and b)how much competition you'd be up against in your area in a more general market.
If there's not too much competition, you may as well take what comes your way, rather than limiting yourself to just a small niche.
On the other hand, if you have a strong niche, and can do well there, it's not worth spreading yourself too thin, especially if you have to work hard to compete against others for areas outside your niche.
Niche or no niche, I think your exit strategy is very important either way. If you have plenty of cash and you are going to rent the homes, that's one thing.
If you are operating with borrowed money your plans will be different. FHA will only finance 4 homes for Investors. It would be hard to make very much on 4 investment homes.
If you are going to rehab the houses for resale, have you thought about the market coming 10/01/08 when lending standards are going to tighten even more. It seems that we are headed to the point where only "A" credit people with plenty of down payment money will be the only ones you can flip to.
Just be sure you can assist your buyers by helping them find creative financing. It will still be around.