There are several types of real estate investments. Still, most fall into two categories: Physical real estate investments like land, residential and commercial properties, and other modes of investing that don’t require owning physical property, such as REITs and crowdfunding platforms.
Investing in traditional, physical real estate can offer a high return, but it also requires more money upfront, with high ongoing costs. REITs and crowdfunding platforms have a lower financial barrier to entry, meaning you can invest in multiple types of real estate for far less than it would cost to invest in even one traditional property. These alternative real estate investments also offer the distinct advantage of not having to leave your house or put on pants to start investing. These are the Top 5 Types Of Real Estate Investments in the following article.
1. Residential Real Estate
There are numerous rental property types of real estate about Residential Real Estate, though the most common is thought to be single-family homes (villas, multi-story houses, level 4 houses). Other residential properties include 2-bedroom, 3-bedroom, penthouse units. Residential real estate is ideal for many investors because it can be easier to turn profits consistently. Of course, there are many residential real estates investing strategies to deploy and different levels of competition across markets. For this reason, choosing the right exit strategy and demand is critical when it comes to residential real estate.
The most common exit strategies used in residential real estate include wholesaling, rehabbing, and buying and holding properties, which inventors can use to generate rental income. Investors should be careful to consider which strategies would work best in their market area by conducting a thorough market analysis.
When managed correctly, a residential real estate investment can yield attractive profits.
2. Commercial real estate
Commercial real estate is one of the types of real estate that is rented or leased by a business. An office building rented by a single business, a gas station, a strip mall with several unique companies, and leased restaurants is all examples of commercial real estate. Unless the business owns the property itself, each business will pay rent to the property owner.
Industrial and retail real estate can fall under the commercial umbrella. Industrial real estate generally refers to products made or housed rather than sold, like warehouses and factories. Retail space is where a customer can buy a product or service, like a clothing store. Commercial properties tend to have longer leases and can command more rent than residential properties, which may mean higher and steadier long-term income for a property owner. But they may also require higher down payments and property management expenses.
3. Raw Land Investing & New Construction
Raw land investing and new construction represent two types of real estate investments that can diversify an investor’s portfolio. Raw land refers to any vacant land available for purchase and is most attractive in markets with high projected growth. New construction, too; however, properties have already been built on the land. Investing in new construction is also popular in rapidly growing markets.
While many investors may be unfamiliar with raw land and new construction investing, these types of real estate can represent attractive profits for investors. Whether you are interested in developing a property from start to finish or profiting from a long-term buy and hold, raw land and new construction provide a unique opportunity to real estate investors.
Investors should be prepared to complete extensive market research to maximize profits when investing in raw land and new construction. This will ensure you choose a desirable area and prevent the investment from being hampered by market factors.
REITs, or real estate investment trusts, are companies that own commercial real estate (think hotels, offices, and malls). You can invest in shares of these companies on a stock exchange. By investing in REITs, you are investing in the real estate these companies own, without as many of the risks associated with owning real estate directly.
REITs are required to return at least 90% of their taxable income to shareholders every year. This means investors can receive attractive dividends in addition to diversifying their portfolios with real estate. Publicly traded REITs also offer more liquidity than other real estate investments: If you find yourself suddenly needing some cash, you can sell your shares on the stock exchange. If you want to invest in publicly-traded REITs, you can do so through a brokerage account.
5. Crowdfunding Platforms
Crowdfunding platforms offer investors access to several assets that provide high returns and are usually reserved for the wealthy. While this provides the ease of finding assets to investors, this type of real estate investment also introduces a high amount of risk. Crowdfunding platforms are typically limited to accredited investors or those with a high net worth. Some sites offer access to non-accredited investors as well.
Ultimately, the best way to invest in real estate depends on your long-term goals, risk tolerance, and willingness to learn how to invest in real estate directly. Those not interested in learning the markets can still diversify investment portfolio real estate through REITs, crowdfunded real estate platforms.
But anyone willing to master direct real estate investing can benefit from tax advantages, predictable returns, and a slew of other benefits to real estate vs. stocks for early retirement and financial independence.
Choose carefully as you review the various types of real estate investments. Remember, you aren’t locked into one investment type only; you should invest in many types of real estate investments strategies above to diversify your assets and passive income sources.
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