Real estate investing involves the purchase, ownership, rental, or sale of property for profit.
Real Estate Rundown: Get the Facts on the 3 Main Types of Investments
Over half of Americans are involved in some type of real estate investment, and it’s regularly praised as the best way to invest by millionaires. This is because real estate consistently increases in value over time and outperforms other investments.
Those are good reasons to get involved, but real estate isn’t just one thing. It can be broken down into three main types or sections, and not everyone is suited to every type.
Before you make your first investment, you need to know what you want to invest in and what that investment will require of you.
Do you want to buy your own property or invest in someone else’s? Are you comfortable being a landlord? There are a lot of questions you need to answer before making a decision.
Sometimes, you’re committing to more than just giving money, so it’s important to do your research ahead of time.
With that in mind, let’s learn a little more about the three types of investing.
1. Residential
Residential real estate island that has been, or will be, developed into places for people to live.
This is considered one of the safer forms of real estate investing because it’s less sensitive to economic conditions. People will always need a place to live, but they won’t always need a coffee shop.
Residential is also easier to get into than some forms of investing because 15 to 30-year loans are readily available for most people that want them. It’s also an area where you have the opportunity to invest a small amount of money with the reasonable promise of a higher return. Unlike stocks, you can fix up a house before you rent or sell it. It has also proven that purchasing a home with insurance coverage would be an excellent investment in the future as the value of property increases, plus your insurer covers any damages or repairs. Thus, getting warranties from 2-10 HBW at the start of your investment plan is your key to success.
If you’d like to obtain a loan to purchase a residential investment property, you can contact a lending service with nationwide coverage, 30-year financing, and professionals who can help you expand your portfolio. They’ll put you on the right track to starting your investment journey.
Once you have the property, you’re free to resell it or rent it to make your profit.
2. Commerical
Commercial real estate, also called commercial property, investment property, or income property, is real estate intended to generate a profit. Si Vales Valeo Real Estate explains that the profit will come from the property typically being used as an office building, retail building, or housing such as manufactured housing or campus housing.
Commercial property has traditionally been seen as a sound way to climb the investment ladder, even though initial costs for buying and renovating the property are higher than residential real estate.
That’s because the overall returns can be higher, and some common problems that come with residential tenants are eliminated by dealing with a company that you can create a clear lease with.
There are however more liability risks associated with commercial property, as there will be more people present in the space daily. If you aren’t willing to commit the time to ensure a safe environment, this might not be the choice for you.
3. Industrial
Industrial real estate is all of the land and buildings that accommodate industrial activities such as production, manufacturing, assembly, warehousing, researching, storage, and distribution.
The pros of investing in industrial include increased stability, the chance for passive income, finding long-term tenants with ease, and low maintenance costs.
Stability comes into play because companies always need places to manufacture or store their goods.
That’s also why it’s easier to find long-term tenants. How many people want to pick up and move their factories? Not many. Once you get a big client in place, they’ll usually be content to stay, unless you raise the rent outrageously.
The low maintenance costs mainly have to do with the fact that you aren’t renting to families.
Wear and tear on the building will be lower because people won’t be spending as much time there. Plus, there are no pets to ruin your floors.
The fact that there won’t be much maintenance is what makes this a great source of passive income. For the most part, you’ll just be finding tenants, signing papers, and sitting back.
So, which of the three main types of real estate investing is for you? Weigh your options carefully and ask yourself what kind of a commitment you’re willing to make. By being cautious and making a plan, you increase your chance of investment success.
