Successful investors are not just landlords. They are smart property entrepreneurs with portfolios that replicate those of portfolio managers who focus on profitability while offering value to clients.
One real estate investment strategy that offers significant rewards is investing in affordable housing or building homes or rentals for people with limited incomes. Look at some advantages of adding affordable properties when investing in real estate.
- Investors in the U.S. who include affordable housing in their portfolios receive government tax credits. For instance, the Low-Income Housing Tax Credit, also known as the LIHTC, is an incentive given to private real estate investors who make equity investments in affordable rental apartments and homes.
- Investors reap excellent financial rewards when they invest in affordable housing that an area needs and can use. Not only do they benefit financially, but the surrounding community also becomes more marketable.
- Calculating the costs of buying and renovating affordable housing can increase an investor’s income because the need for habitable homes for low-income people continues to increase. By investing in affordable properties in desirable areas, the investor can ensure continuing demand and ongoing profitability.
Understanding the Market for Affordable Homes
An investor must scrutinize the marketplace to get the most out of investing in affordable housing. He or she must focus on providing homes for people with lower-income reserves. Property owners can receive tax credits if they use a percentage of their property for this purpose. Renters, in these situations, also receive financial assistance (such as vouchers) to pay their rental costs.
Four groups of people are excellent candidates for affordable housing today. They include:
- Seniors (people 65 years old and older)
- People with disabilities
- Military personnel
Therefore, an investor can focus on the group or groups he wants to target when establishing rental properties or building affordable homes. For instance, the Low-Income Housing Tax Credit, also known as the LIHTC, is an incentive given to private south carolina real estate investors who make equity investments in affordable rental apartments and homes.
Housing for the Elderly and Disabled
People 65 or older or disabled represent a large (and growing) percentage of the population in the U.S. So, they also offer increasing opportunities for investors who wish to direct their money toward affordable housing investments.
In the next 30 years, studies show that people that make up these groups will represent a substantial part of the population. Not only will they need affordable homes within which to live, but they will also need modifications, such as ramps, wheelchair-accessible bathroom facilities, modified closets or cabinets, and the addition of handrails.
Affordable Housing for Students
Another important group, students, needs affordable housing near campuses. Also, international students require affordable housing throughout the year. This sector can be beneficial financially to investors, and investors can provide advantages, financially, to the renters, thus creating a win-win situation economically.
Affordable On-Base and Off-Base Military Housing
Military members may take advantage of housing on and off military installations. An investor can invest in either on-based or off-base housing. While on-base housing requires property management, construction, and maintenance skills, off-base affordable housing must be close to a military base. Investors who put their money into off-base housing should know how to contract with the government and familiarize themselves with regulations for each military branch.
Transitional Residences: Another Investment Option
Investors who invest in affordable housing may also consider transitional housing or housing used by the homeless, recovering addicts, or people who have been released from prison. The housing may also extend to children in state protective service programs or adults who are patients in mental health programs.
Your investment in affordable housing will hinge on two criteria: marketability and the generation of revenue. Therefore, you need to know the average income for the area in which you plan to invest to figure out your return on investment (ROI) when making this type of investment.