Short-term property investment has become an increasingly popular way to generate rental income and capital appreciation over a 1-3 year time frame. By leveraging factors like low interest rates, rising rents, and booming housing markets in some metro areas, investors can achieve annual returns of 8-12% or more. However, short-term investing does carry risks if property markets soften. This article will overview 5 major types of short-term property investments and key criteria to evaluate each one.
Retail properties offer stable cash flow but faces e-commerce threat
Retail properties like shopping malls and standalone stores represent the largest share of commercial property investment in the US. Anchor tenants like grocery and home improvement stores ensure reliable rental income. However, the continued shift to online shopping puts pressure on demand for retail space over the long run.
Residential rentals in growing urban markets offer higher returns
Markets like New York and Los Angeles with surging housing costs and rents can provide ideal short-term rental property returns for investors. Factors to analyze include population and job growth trends driving housing demand.
Healthcare properties intricately tied to demographic shifts
An aging population and rise in healthcare spending bodes well for medical office buildings and senior housing over a 3-5 year horizon. However, reforms and spending changes on Medicare/Medicaid create uncertainty for properties relying on government reimbursement.
Office returns linked to business cycles and location
While the economy and labor market influence office property fundamentals, investing in growing innovation hubs can provide insulation against downturns. Overall quality of a metro area’s business environment and infrastructure matters more than a single blue-chip building.
Mortgage REITs offer high yields but vulnerable to rate hikes
Mortgage REITs invest in pools of real estate loans rather than directly owning property. Their high dividend yields must be weighed against portfolio risk and cost of borrowing. Rising interest rates can pressure earnings.
In today’s low rate environment, short-term property investment provides an opportunity to achieve double-digit returns. However, investors must carefully evaluate property types and markets, with especial focus on the strength of underlying demand drivers.