The best kind of real estate investment
According to Forbes data, more billionaires have made their fortunes through real estate investments than any other category – by far.
What are the best types of real estate investment? The rise of the real estate market prompted investors to search continuously for the available types of real estate to discover what might lead them to profit. So what are the real estate sectors that make up the best moves for investors today? Continue reading this article to learn more about the best types of real estate investment for you.
The best kind of real estate investment
There are several types of real estate investment that you should be aware of such as commercial, residential, raw land, new construction, crowdfunding platforms, and real estate investment funds. Each of these types includes a set of advantages and disadvantages that you must evaluate before taking any step.
1- Residential real estate
There are many types of rental properties in residential real estate, the most common being single-family homes. Other residential properties include duplexes, multi-family properties, vacation homes, etc. Residential properties are ideal for many investors as they guarantee continuous profits.
There are many residential real estate investing strategies that you can adjust to your own goals. This is why choosing an exit strategy is key when it comes to residential real estate, and the latter manifests itself in wholesaling, rehab, real estate purchase and acquisition, and so on. Make sure that you do a thorough market analysis before considering which strategies will best fit your niche.
Residential real estate investment can bring attractive profits. In addition to giving you a steady cash flow, you benefit from tax breaks.
2- Commercial real estate
Commercial real estate that can be invested in includes industrial, office, retail, hospitality, and so on projects. Commercial real estate is considered one of the best types of real estate investment because it provides high cash flow, longer lease contracts, and lower vacancy rates than other forms of real estate, in addition to the competition that is much less fierce than residential real estate.
3- Raw lands and new construction
Investing in raw land and new construction are two types of investments that ensure diversification of the investor’s portfolio. Rough land refers to any vacant land that is available for purchase and is most attractive in developing markets. Investing in new construction is not much different from investing in raw land, as it is also common in fast-growing markets.
Whether you are interested in developing a property from start to finish or benefiting from a long-term buy and hold, raw land and new construction offer a unique opportunity for real estate investors. You will first need to conduct extensive market research in order to be able to choose areas that have high demand.
4- Real estate investment funds
REITs are companies that own different types of commercial real estate such as hotels, shops, offices, shopping centers, or restaurants. You can invest in the shares of these real estate companies on the stock exchange without the added risk of owning the property yourself.
Real estate funds are required to return 90% of their taxable income to shareholders each year which gives them the possibility to receive dividends while diversifying their portfolio at the same time. REITs generally provide flexible liquidity unlike other types of real estate investments.
5- Crowdfunding platforms
Crowdfunding platforms give investors access to many assets that offer high returns. Crowdfunding platforms are usually limited to accredited investors or those with high net worth. The main types of real estate investments from crowdfunding platforms are non-exchange REITs where your money is invested for several years with no possibility of withdrawing your money when you need it.
What is the best type of real estate investment?
Investors are usually looking for a clear answer. In fact, the best type of real estate investment depends on your individual circumstances, goals, market positioning, and investment strategy. You should also weigh the pros and cons of each option.
When choosing the best types of real estate investment, you should never underestimate the importance of location. Investors operating in “promising” markets may succeed by investing in vacant land or new construction, while investors operating in “mature” markets may be more interested in residential real estate.
Regardless of the location, investors should be aware of their preferences when it comes to investing. You must assess the extent of your tolerance for risks and the levels of profitability that you aspire to achieve before you decide on the type of real estate in which you want to invest. Investors desiring a less active role may choose to purchase and hold commercial or residential properties and then hire a property manager to take over management, while those hoping for a more active role may find vacant land development or residential home rehabilitation.
Active investment and passive investment
The difference between active and passive investments must be taken into account. Active strategies, as the name suggests, require a more hands-on management approach. You will be responsible for coordinating renovations, supervising contractors, and ensuring the eventual sale of the property. Active strategies require more time and effort, but they are always associated with large profit margins.
Passive real estate investing, on the other hand, is ideal for investors who want to take a less involved approach. Examples of passive real estate investing include real estate investment trusts, buy-and-hold, or owning rental properties. This strategy allows you to get passive income, as all your investments are managed by someone else.
Where to find real estate investment properties
You don’t have to waste a lot of time determining the right type of property, you also need to know where and how to find each one. Here are some options that may help you complete this task successfully:
Multiple listing service or sale service by the owner
You can find a variety of investment opportunities through the multiple listings service, as there are many properties that are not exploited due to their lack of some marketing, or because investors do not have the skills of accurate research and prospecting. To take advantage of these opportunities, investors either need to be real estate agents or be willing to work with them.
It may be beneficial for investors looking for owner-sale services to work with real estate agents who are knowledgeable about this option. This does not mean that it is impossible to make investments through working alone, but remember that identifying and finding the right type of real estate is a time-consuming process.
Real estate off the market
For investors living in saturated markets, off-market real estate can be an opportunity to get ahead of the competition. When it comes to researching this type of real estate, there are some resources investors should check out first such as public records, real estate auctions, wholesalers, networking events, contractors, etc. Each of these sources represents a unique opportunity to find real estate in a particular area. For example, wholesalers are often aware of newly renovated properties that are available at reasonable prices.
Summary
High profit margins are not exclusive to one type of real estate, and the wide variety of options available to investors may lead to a kind of confusion regarding the best types of real estate investment. Despite the simplicity of the question, the answer to it is almost impossible. As mentioned earlier, the best type of real estate investment depends on many different factors that investors should consider before they rule out any options when looking for potential deals.
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