Before you even start to look at property, you have to decide what your niche is. This probably seems like the most boring step, but is extremely important. A little bit of planning now can save you a lot of frustration and mistakes years down the road. We have learned this from experience so trust us on this one!
What is a property niche?
A niche is a specific segment. A focused, targetable part of a market for certain products or services that has unmet demand. With that in mind, a property niche is a specific property category that has room to grow.
The following chart shows just some of the ways that you may classify a property.
|Type of Property||Target Market Income||Rental Purpose||Location|
|Single Family Home||Low Income/HUD||Long Term Rental||Small Town|
|Duplex/Triplex||Middle Income||College Student Housing||Suburb|
|Multi-Unit||High End/Luxury||Vacation Rental||Large City|
So from the chart you could have a duplex that you rent to college students from a middle income background in a small college town or you could have a single family high end vacation rental in a large city. The point is that you have to narrow down what types of properties that you are looking for before you even begin your property search. Currently we have mostly single family homes and duplexes and triplexes that are aimed at the middle class in a long term rental situation in a small town.
When you know your niche, it makes it so much easier to narrow down what properties you are interested in looking at. You can get very specific. There are only a few neighborhoods that we are interested in buying in. These are areas where we live and have worked, so we know them very well. There are always good deals out there, but if the deal isn’t in our area, it isn’t worth our time.
Disaster from Not Knowing your Niche
We have a great example of not knowing your niche, and it led to disaster. Several years ago, Brad was planning on attending a property auction in a town about an hour away. He was going purely for observation purposes to see how the process works. However, it was just such a good deal, and since we didn’t have very specific criteria of what we would and would not buy, he put in a bid and won the auction. It was a single family home directly across the street from a school. The town was a small town, but was very close to a large University and people that worked at the University often lived in this small town. We planned to fix up the property and resell it below market value for some quick cash. The numbers worked and it seemed to be a good deal. The problem was that the property was an hour away from where we lived at the time. We worked to fix up the property over a couple of months, and we were miserable. The long commute and time spent juggling all of our responsibilities was a nightmare and severely damaged our relationship as a couple. To top it off, as we didn’t know the town very well, we soon discovered that we made some serious mistakes and the house did not sell quickly at all. We eventually had to rent it for years, and recently did end up selling it. Unfortunately, we made nothing on the deal. We didn’t lose any money, but we made a serious mistake in buying a property that was not even close to where we reside. Now, we have very strict criteria for where what properties we invest in.
Narrow down your niche and save yourself frustration and heartache.