When you hear the term real estate investment, you more than likely think of your home. Yet, various real estate options can grow your money and improve your financial security. But there are five types of real estate investments apart from owning your own home.
5 Types of Real Estate Investments
If you are looking for an investment that can help you generate a large return, buying property is often an intelligent decision. Yet, the property you buy can determine how much cash you will generate. Make an informed choice by reading this rundown of the different types of real estate investments.
1. Flipping Houses
Flipping houses could be a perfect option if you have a flair for DIY and the money available to make necessary property updates. To earn a quick profit, you will need to browse the real estate market to find a property to update.
For example, you could increase a home’s value by remodeling a kitchen, bathroom, or backyard. Also, various cosmetic updates and essential repairs could boost its resale value. Some real estate investors even buy properties and hold onto them until the housing market improves to sell them for a much bigger profit.
2. Renting Vacation Homes
Another option is to purchase real estate at a popular tourist destination, which you can then rent to families, groups of friends, couples, or solo travelers. However, you must choose the right property for the location, your desired guest size, and proximity to local attractions, such as the beach, stores, or public transport. Read this guide to buying a holiday home to prevent a mistake.
3. Property Rentals
To generate a substantial return on your investment, property rentals are a smart choice. While a landlord will need to commit to a down payment and monthly mortgage repayments, a tenant will cover the financial cost during their tenancy.
Of course, as a landlord, you’re responsible for paying a mortgage on schedule, property taxes, insurance coverage, maintenance requirements, and home improvements. However, you can remove some pressure by hiring an experienced property manager to care for a tenant’s needs.
4. Commercial Properties
Commercial property is an alternative option to residential rentals, as you will lease space to large companies or small business owners, such as individual offices, retail stores, or restaurants. Typically, a commercial real estate investor will require businesses to commit to a multi-year lease, which will provide greater financial security.
5. Buying Land for Real Estate Developments
Another option is buying land for residential or commercial development. However, it is crucial to perform extensive market research, and you will need to improve your knowledge of the following:
- Zoning regulations
- Building codes
- Flood plains
There is no guarantee an investor will want to build on the raw land. Improve your likelihood of success by finding land in a popular or up-and-coming neighborhood, which offers suitable land for commercial or residential developments.
Investing in real estate is a smart way to build wealth. There are many types of real estate investments that we didn’t cover here. The main thing is that you do your homework and research each aspect of the investment. Speak with experts. Formulate a business plan. Then act decisively. Learning from an experienced real estate investor is the surest way to grow your own successful business.
