Real Estate: Which Type Should You Be Investing In?

Real Estate is one of the oldest investments known to the human race. Having shelter over us is a basic human need and this has developed into wanting to have the best shelter over our heads as possible, so it is no wonder that putting your money into such a valuable commodity is worth your while. It is the reason why everyone knows real estate is a sound investment. However, what a lot of people don’t realise is the choice you have when it comes to investing in real estate.

The reason this is important is fairly straightforward: different property types come with different benefits and different, well, pitfalls. Knowing what is out there will also help you make an informed decision on what you want to do with it, such as live in it, develop it, flip it or rent it out. That is why we have listed the main types of real estate for you to sit down and ponder over, with a peppermint tea in your hand if you so desire.

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  1. Residential

This is hands down the most common type of property to invest in. It’s things like apartments, apartment buildings, townhouses, normal house and good old fashioned vacation homes. Basically, they are properties where either you or someone else lives. What makes a good residential investment depends on a lot of variables, but things like it being a luxury real estate in a sought after location with good amenities and transport tend to go a long way. In terms of rent, you typically work on a 12-month contract.

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  1. Commercial

This is where you buy an office building or a block, and lease it out to businesses that need somewhere to operate from. The great things about going down this route are the option to use a multi-year lease. More stability is never a bad thing when it comes to an investment. That’s not all, though, because by operating a multi-year lease you can still reap the rewards even when the market drops, although that could obviously risk your profits too should the market get awesome.

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  1. Industrial

These are becoming more and more popular at the moment. They are things like storage units and warehouses and car washes, and any other form of real estate that has a specialist purpose. The only real downsides to this are the niche nature of your customers, as well as the fact they can be a little more hands on. However, on the plus side, there is the chance to improve your revenue with fee and service charges. For example, having a coin-operated vacuum cleaner at a car wash. Little things like this can soon add up.

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  1. Retail

This includes anything that is used as a shop. It could be a single retail store on a high street or it could be an entire shopping mall on the edge of town. How your agreement works with the tenant is up to you, but what a lot of retail landlords are doing these days is charging a base rate for rent, as well as taking a percentage of the sales made. However, the only way this works if you agree to keep your retail property in top notch condition. It is sort of an incentive in that respect.

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One thought on “Real Estate: Which Type Should You Be Investing In?

  1. My first property was a 4-unit property in a suburb of Los Angeles that I picked up in my 20s for only 3.5% down! I lived in one unit and rented out the other three. Single at the time, I also rented out the bedroom in my unit and slept on a mattress in the living room. And guess what? Through the FHA program, I only had to put 3.5% down!

    This was an incredible deal and has proved to be a major boost to my net worth. I’ll give you 4 reasons: 1) I was living for free while my friends were paying through the nose for L.A. rent, 2) I was building equity as my tenants paid down my mortgage, 3) I was cash flowing hundreds of dollars a month, and 4) I got 4 units an hour from Downtown L.A. for a mere $15,000 out of pocket, and the property has already substantially appreciated.

    The FHA fourplex strategy really is a no-brainer for single Millennials. If one does nothing else in real estate, they will have succeeded by getting into a fourplex as a young man or woman with only 3.5% down.

    Assuming the rents cover their expenses, in 30 years when they’re in their 50s and the mortgage is paid off, and they’ve done the smart thing by raising the rents over the years, they will be sitting on a million-dollar asset that cash flows thousands of dollars per month at the cost of a measly $15k or so out-of-pocket when they were 20-something.

    I can’t think of any better way for young people with limited resources to prepare for their future so early on in life with so little cash out-of-pocket.