They say the riches are in the niches—and nowhere is that more true than in real estate investing.
As someone who reviews vastly different real estate investments every day as an organizer of a hands-off investment club, I wish I could say I’ve seen it all. But in this industry, there are thousands of deep niches, and no one knows them all.
Here are a few favorite real estate investing niches I’ve seen this year, including many I’ve invested in myself.
1. Property Tax Abatements
In my co-investing club, we’ve actually vetted and invested in several of these this year. They’re all performing great.
They work like this: A real estate syndicator partners with a nonprofit housing agency and the local municipality to set aside some or all of the units in an apartment complex for affordable housing. In return, they get a property tax abatement, typically 50%-100% of the tax bill.
Most people hear this and scoff: “Won’t the rent restrictions offset any savings on property taxes?”
Nope. At least not if the syndicator chooses the right deal.
For some properties, the market rents are already under or around the limit imposed by this affordable housing designation. That makes the property tax abatement all upside.
It boosts the NOI (net operating income) immediately upon purchase, without requiring a single swing of the hammer for renovations. Because commercial real estate is priced based on NOI, this raises the property value from Day 1.
2. Section 8 Overhang
Properties that enjoy the Low Income Housing Tax Credit (LIHTC) also save big on taxes. But those tax savings come with a downside: caps on what…