Whether you’re gearing up to make your first real estate investment or you’re looking to expand your portfolio, you have to decide what type of property you want to put your money in to. Today we’ll examine five of the most common types of real estate investments and will take a look at the pros and cons of each.
From basic singles to double-wides, mobile homes come in many shapes, sizes and styles in lots of different areas. Mobile home parks serve as retirement communities, diverse residential homes and everything in between.
There are very low initial capital requirements, fewer opportunities for major faults to arise pre-sale and you have a great opportunity to enter a high demand, low inventory market in many different areas.
You may have frequent maintenance requests, you could difficulty finding an acceptable tenant and you may experience high renter turnover.
Considered by many to be the “bread and butter” of real estate investing, there are plenty of reasons to consider single-family homes as your property of choice. From basic two bedroom properties to large four bedroom homes, the variety of properties allows you to pick and choose what kind of renters you want to cater to.
There are tons of properties to choose from, it’s easy to secure financing for a purchase and there’s plenty of opportunity for finding a property that fits your budget.
Inspections mean there’s potential for uncovering huge maintenance costs, it can be difficult to maintain a positive cash flow if the rental demand dwindles and it can be difficult to upkeep the property and maintain the home’s value.
Many businesses don’t own the properties they use. Instead, they lease from investors. If you know an area in your town is up and coming and businesses are vying for a space to open up shop, you may have a great opportunity to make some money.
You have the ability to charge higher rent than you can for a residential property, long-term leases provide options for consistent profit and owning business spaces introduces you to local business owners, potentially opening the door to branch into other types of investments.
Commercial properties often require a very large initial investment, you have to navigate significantly more complex legal issues than you do with residential sales, vacancies – especially those caused by shifts in the local economy – can be long-lasting and difficult to weather and attracting the right tenant can be a challenge.
Small apartment buildings:
A small complex typically consists of somewhere between four and ten units. Owning a multi-unit residential property can be very lucrative, especially if you snatch up a property for a good price that pulls in a good amount of rent.
Having a larger revenue stream increases your odds of generating a positive cash flow, there’s tons of potential for long-term gains in markets with high rental demand and all your maintenance happens in one location – simplifying the management process.
You have to do more marketing and spend more time finding tenants for each unit, if your market has high rental turnover you may lose money when units are not occupied and there’s a high financial barrier to entry.
Land is where it all begins, but is it a wise investment? It can be, but there are more considerations that need to be made with land than there are with existing properties.
There’s significant potential for an increase in value after improvements or through leasing, there’s a possibility of long-term appreciation due to nearby growth and it can be a smart investment in areas where raw land is in short supply.
The price can vary wildly and land can be very expensive, if the local economics shift, developments may never materialize and you may struggle to find anyone to lease the property.
Now that you understand the pros and cons, you can choose which investment is the best fit for your budget and investment goals.
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