What Types of Real Estate Investments are There?

you’ve heard all of the quotes…they’re not making any more land…how many millionaires have been created by real estate investments, and now you want in. Where do you start?

If you are looking to actively invest in real estate, there are different ways to do it. Often, investors specialize in a certain type of real estate investing.

Consider Remodeling a Condominium Unit

condo remodel - aurora

Pros: Lower Risk. When purchasing a condo unit, you’re remodeling the interior of the space, so you normally will not have to be concerned with the building’s integrity. Although, you should always investigate the building’s issues and the ability of the owner’s association’s ability to work through it. Condominiums are often less expensive than houses, so there is an easier entry to purchase.

Cons: The HOA mentioned above can often be expensive. Because they insure the building and often provide additional services like utilities, trash, amenities. These add to your holding costs should the unit take a while to renovate or stay on the market. The upside is more limited than single family. It isn’t possible to add square footage or improve the exterior which often lead to higher profits in other types of real estate investing.

single family

Remodel

Looking for more risk, but possibly more reward? Consider Remodeling a Single Family Residence

Pros: As stated above, there are more possibilities for making a higher profit. A distressed property can be improved in many ways

Cons: generally, you have more money invested than condos which could lead to less capital available or more holding costs. Fixes are also generally required on the exterior and interior of the home in order to improve value.

new construction

Single Family

Build a Single Family Residence

Pros: Potential buyers have interest in new construction homes, especially today when inventory is very low. There is a significant potential for profit when you create something that the market needs. There are some controls that can be made when designing a home to make things less expensive vs. having to work with whatever mystery problems arise in fixing an existing home.

Cons: There is more risk to building a new construction home than remodeling an existing home. Lenders are looking for investors with more experience and capital in order to finance a new construction home. Holding costs are substantial. There are often more liability risk in building new construction should there be defects. Insurance and code requirements are more strict as well.

multi-family rentals

Own a Multi-Family Building

Pros: Often there are opportunities to finance the building where you can live in one unit and rent out others. Multiple tenants are in one area for ease of management and maintenance. You control a building rather than owning one unit in a building where you must vote or agree as owners or as part of an HOA to fix or improve things.

Cons: Multi Family buy and hold projects are desirable and more expensive. Generally when things break in a building, it will require more capital as multiple issues arise.

commercial buy and hold

Owning Commercial Property

Pros: There is a potential for more professional tenants. Tenants also normally want to stay longer term than residential tenants, because they want to establish their location, invest in its improvement and not move to hope their customers follow them.

Cons: These properties are more expensive and lenders are generally looking for more experienced investors in order to finance you. While the market is much larger to find a residential tenant, there are fewer commercial tenants.

residential lot

for future development

Land Speculation

Pros: If you are just purchasing land and not improving it right away, the costs can be lower than improved property. If you’re able to purchase unimproved land, the potential value increase could be quite large, especially if you were to improve the land yourself by annexation, platting or building.

Cons: Most believe that Land Speculation is some of the riskiest of investments. You could have to hold land for a long time in order to it to be in the path of development and raise the value. In this time, there are holding costs. Many lenders do not want to provide more than 50% LTV against vacant land.

We hope this provides you some helpful information. We would love to hear from you for what types of projects you are interested in investing in!