Why should you become a real estate investor? Well for one, it’s fairly easy to get started-easier than people think. While investing in real estate is risky (although all investments are risky), many people have become successful at doing it, earning a second stream of passive income.
You can continue to work your normal job-or retire early because of your real estate investment. Of course, your level of success has many factors, one of them being the type of real estate to invest in.
Types of Properties to Invest in
1. Vacation Rentals
Vacation rentals are one of the most common types of properties that people invest in. These are single-family homes that are rented to tenants on a short-term basis, usually no more than six months at a time. Keep in mind that there are laws that prohibit short-term rentals in certain areas, so do your research before buying a vacation rental property.
On the other hand, the places that do allow short-term rentals also allow you to stay in your own vacation rental for a few weeks out of the year. So the next time you’re on vacation, you’ll already have a place to stay.
2. Residential Real Estate
Residential properties are those properties that house individuals and families, including single-family and multi-family homes. This is another popular option, especially among first-time investors. It’s true that people are buying homes as often as they once were, meaning that they are renting more than they once were. Many investors have made steady income from renting a residential property to tenants.
3. Commercial Real Estate
Commercial properties are buildings used for business, such as restaurants, malls, hotels, industrial buildings, office buildings, warehouses, etc. Some apartment complexes are considered commercial real estate because they are also places of business. Overall, investors see the most consistent income from commercial properties, although commercial properties are significantly more expensive than residential properties.
4. Mixed-Use Real Estate
As the name suggests, mixed-use properties are used for both commercial and residential purposes. Because of this definition, apartment complexes can also be classified as mixed-use properties. Another example of a mixed-use property is a two or more story building that has business operations on the first floor and residential quarters on the top floor(s). You can find mixed-use properties to invest in in a variety of places, especially in bigger cities.
Invest Without Buying Property
If you’re still wary about investing in properties, look into real estate investment trusts, or REITs. These are similar to mutual funds, where a company or other establishment invests in a commercial property, and you’re able to buy into their investment. The only downside is that you won’t make as much money as if you invested in a property yourself, but you also don’t assume any risk.
This strategy allows a group of people to pool their money together to invest in real estate. There are several platforms for crowdfunding, and the majority of the work (advertising and maintaining the property) is often done for you, whereas this is your responsibility as the property owner.
3. House Flipping
Flipping houses requires you to purchase property technically, but when you’re purchasing for the sole purpose of renovating and then reselling, you pay a significantly lower amount for these homes than you would for other residential properties. The key to being successful at flipping houses is to know which renovations and remodels increase the value of a home.
4. Raw Land
The land is also technically property, but it’s often less expensive than other types of real estate because it doesn’t require you to do anything to the property to earn money from it.
Other types of real estate require some level of maintenance for success, but raw land can sit idle and increase in value over time.
There are many ways for you to get your foot in the door of the real estate industry. Just choose the option that’s most suitable for you, but always do your research before investing in anything.