Common Real Estate Investment Types to Diversify Your Portfolio

Real estate investment can be divided into different types. Learning the different types can help you get started in real estate investment.

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Common Real Estate Investment Types to Diversify Your Portfolio

Posted by Gary Ashton on Tuesday, April 16th, 2019 at 2:50pm.

Everything You Need to Know About Real Estate Investment for BeginnersReal estate investment is an excellent way to build an investment portfolio, make money for your savings or retirement, and supplement your everyday income. If you're serious about real estate investment, you might expand into bigger markets and increase your profits. Though looking at new homes to buy can be fun, searching for homes as an investment is a different ballgame. This article will help you learn the basics of real estate investment, so you can make a strong start with your first investment property. The more you know, the easier it will be to invest wisely.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.

Residential Real Estate Types

Residential real estate is a common starting point for real estate investors. Residential real estate can take different forms, namely:

  • Rental homes
  • Multi-family homes
  • Fix and Flip homes

Rental Homes

Residential homes are abundant, relatively inexpensive, and comparatively easy to maintain. For a beginning real estate investor, a rental single family home is an excellent starting point. Many people get their start in real estate investment when they inherit a home from an older family member, or decide to rent out their old primary residence after buying a new home.

To successfully rent out a property, the property owner must be able to maintain it. Knowledge of home maintenance and a DIY spirit comes in handy, unless the property owner is willing to hire a property management company. Rental homes only bring in income if they're being rented, so property owners may feel pressure to find new tenants when old tenants leave. Cultivating good relationships with the tenants can help ensure tenants will stay a long time and can also make the experience of maintaining a rental property more satisfying.

Multi-family Homes

Multi-family homes are more expensive than single family homes, and maintaining these properties can take more time than maintaining a single family home. Still, multi-family homes do have advantages over single family rental properties.

The most obvious advantage is that the property will continue to generate income as long as at least one of the units is occupied. When one tenant leaves, rent from the other tenants will help carry the cost of maintaining the home while the property owner is trying to fill the vacancy. Often, property owners with multi-family homes will hire a property management company to maintain the grounds and make small repairs.

Fix and Flip Properties

Fix and flip properties are homes that are bought at a low cost, fixed up, and then sold for a much higher cost. This type of real estate investment is attractive to people who are handy with tools and who enjoy home improvement. Contractors sometimes buy fix and flip properties as a side project. This type of real estate investment can be lucrative, provided that the property owner is capable of doing much of the repair on their own.

Commercial Real Estate Types

Commercial real estate can be very different from residential real estate. When trying to decide whether to invest in commercial real estate, the buyer must take into consideration a variety of factors including the local economy and demographics. Understanding these variables can help the buyer determine what type of land is in the most demand in that area. Commercial real estate is broken into different categories, including:

  • Office buildings
  • Retail
  • Industrial

Office Buildings

Office buildings can be expensive to purchase, so first-time investors must usually find a partner, investor or a lender to help them. However, in the right location, office buildings can provide very stable income. Even when one tenant moves out, other tenants help ensure that money will continue to come in. In addition, many businesses sign leases that last for years, which can ensure that the building will continue to generate revenue for years to comes.

Retail

Retail businesses are heavily dependent on location. Shops and restaurants have a hard time succeeding if they're in a location where consumers do not want to go. When trying to decide whether to buy a retail location, the property buyer must do a lot of research to determine if the location is a good one. When buying a retail business, the property owner must understand the importance of maintaining the building. Businesses that are poorly maintained often will not attract as many customers as businesses that are properly maintained. This can have a big impact on the building's profitability.

Industrial

Industrial property can be very lucrative. Often, businesses that require a special kind of warehouse or factory will pay a lot of money to property owners are willing to make changes to their property to accommodate that business's specific needs. Many real estate investors do not get their start in industrial property because of the knowledge and funding required to be a successful industrial property landowner.

How to Get Started?

If you're a beginning Gulch TN real estate investor, contact a real estate agent in your area. Your real estate agent can help you decide which type of real estate investment is right for you, and which property is right for your first real estate investment.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.

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