You may have heard that investing in real estate is the best type of investment. But, do you know what types of real estate investment are worth it? While it can be rewarding and exciting, you must know how to invest in real estate without diminishing your returns.
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What Should You Consider When Investing in Real Estate?
Apart from the types of real estate investment, other factors also influence your decision. Several factors determine whether your investment will help you gain profits or end up eating up your wealth from the property’s location to its features.
- Property Location: Vet the area as thoroughly as you can; if it has a high vacancy rate, it’s probably not a good sign unless it is a developing area.
- Property Taxes: Depending on the area, property taxes will vary. Most do not end up thinking about this until the deal is almost settled, so ensure you calculate how much you will be losing out on before you decide whether it is a good purchase.
- Returns: What are the returns on your purchase? Ensure that you plan your investment logically. Will the rent on your property help you cover your monthly property expenses, or will you need to pay out of pocket?
- Capital Gains: When demands are consistent but supply drops out, you are likely to see capital gains. Although you never know what the future holds, checking the price and rental history of the location can help you gain a better idea.
What Are the Types of Real Estate Investment?
Now that you know what factors affect the returns on your investment, it is time to look at the different types of real estate investment. When thinking of real estate investment, people often buy a home that they can rent out. Truthfully, real estate investments are far more diverse.
Residential Homes
The most commonly known real estate investment is residential homes. They can be homes for rent, vacation or townhouses, or just generally any property where people pay to live. While the length of stay and payments vary, typically, a rental agreement is usually for 12-months.
Commercial Buildings
Typically, these consist of office spaces or skyscrapers. Unlike residential homes, these properties are not easy to buy straight off the market. Instead, you may need to invest capital into building such spaces.
However, commercial buildings tend to have a longer lease agreement, providing more stability. While rent prices tend to increase over time, older buildings locked into older contracts may not raise prices quickly.
Retail Properties
Whether it is large enough for a mall or a single shop, retail spaces can generate revenues. Owners get a fixed rental fare with such properties but may receive a small percentage of the profits.
Industrial Properties
These include car washes, laundromats, storage spaces, houses, and more. Typically, they provide opportunities for significant profits and often have high service and revenue fees.
Mixed-Use Properties
Any property that combines two or more of the categories listed above is a mixed-use property, such as residential buildings, skirted by retail shops or office spaces.
Understanding the types of real estate investment can help you make a better choice. While real estates are a good investment, it’s not always necessary to think of it as buying residential properties.
