There are a number of real estate investments you can make. Each one coming with its own level of risk and reward. The space is littered with stories of people hitting it big with real estate. But in truth, it’s not for everyone. There are many risks involved in real estate investing that most people can’t stomach.
If you take the time to learn about the different types of real estate there is potential for great returns. In this blog post, we’ll be going over 3 different types of real estate investments that you could get started with and how they differ from one another. There are several reasons why investing in real estate can be lucrative.
Even in a soft market, it remains an asset class known for steady returns over time. Especially when buying properties that have the potential to appreciate in value. As such, these three primary types of real estate investments will give you the opportunity to grow your wealth while mitigating some risk along the way.
Investing in Real Estate for Income
Real estate investing is often associated with the promise of appreciation. That being said, what is almost more important than the potential for capital gain is the income that properties can bring in. Property professionals like Walt Coulston, would advise anyone to diversify their portfolio. This is one of the key benefits of passive income. It allows you to earn money without needing to be actively involved in the operation.
This is also beneficial in that it allows you to use the money for reinvestment elsewhere. Or if you are investing for income purposes, it can give you the freedom to relax. Once you have a handle on the different types of real estate and how they operate, you’ll want to start looking for properties that have the potential to generate cash flow.
While there are many different types of real estate investments that can help you earn income, there are a few subcategories that specialize in this particular function. The most common type of real estate investment that offers consistent cash flow is a multi-family dwelling. This is a residential property that has between 1 and 6 units and is most often rented out.
Apartments, duplexes, and triplexes are all common multi-family dwellings. Another investment class that offers steady income is retail property. These tend to be one-story commercial buildings with a predominance of tenants that sell goods rather than services.
Investing in Real Estate for Capital Growth
If you are primarily investing in real estate for capital growth, you’ll want to be careful about which properties you choose. However, if you do your research and find a property with the potential for appreciation, the payoff could be great.
Aside from single-family homes, where you have the potential to earn income from tenants, all other types of commercial real estate have the potential to appreciate. Industrial and commercial real estate, for instance, are often for storage and distribution.
This is real estate that is often in high demand. As such, the owner could raise the rent to accommodate the increased demand—which could lead to capital gain. Finally, commercial real estate with development potential is one of the types of real estate that has the potential to appreciate.
Investing in Real Estate to Help You Learn
Lastly, if you’re someone who is a newbie in real estate investing, you may want to focus on types of properties that will allow you to learn as you go. This will allow you to develop skills and gain experience without needing to risk your capital on a property.
There are a couple of great types of real estate that will allow you to learn as you go. A fix and flip is a residential property that needs renovation before you can sell it. This type of investment will allow you to learn how to renovate property from start to finish.
Another option is to partner with someone who has the experience and get them to manage the property for you. This will allow you to learn from someone in the field and help you ease into the real estate investing world.
There are a number of real estate investments you can make, each one coming with its own level of risk and reward. The space is full of people hitting it big with real estate. But in truth, it’s not for everyone. There are many risks in real estate investing that most people can’t stomach. However, if you take the time to learn about the different types of real estate and do your homework on individual properties, there is potential for great returns.