When looking for new investment, real estate is a wonderful option. However, taking the plunge can be overwhelming especially without knowledge of where to start. This article has options for real estate investment and the benefits of each option. Unlike other investment options, land always retains value and appreciates over time. This makes real estate a great idea for investment diversification.
The real estate market requires having money to purchase property that won’t make your investment tied up or not available for other investment areas. One of the significant benefits of investing in real estate is the protection from inflation. Rising prices of goods and services just encourage property owners to increase the property value and rent prices.
Types of real estate
When looking forward to investing in real estate, it pays to understand the options available. Read on to discover the best option for you before taking the plunge. The rule of thumb is to invest in real estate without breaking a bank with a better ROI. Here are the various options.
Government land
It is so easy to find government land for sale through auction online. You have a chance to browse until you find the type of land you want in the desired area at cheaper prices. Land offered by the government for sale is usually cheaper than that on the property market. The government sells land vacant land to get reimbursed on property whose previous owner failed to pay tax. Investing in this kind of land is a smart decision to become a landlord on a small budget with a guarantee to land without issues.
You can invest in this undeveloped land for a new construction or recreation purposes. This land is usually without existing structures to offer flexibility regarding how to use your land. The money saved at purchase helps in preparing the land for development. However, you have to follow local permits and regulations before embarking on any project.
Residential real estate
These properties include condos, single-family homes, duplexes, quadruplexes, and triplexes. Residential real estate comes with high appreciation backed by attractive financing options. Investing in residential real estate is a smart move and requires little capital depending on the market. Additionally, this investment has lenient zoning requirements compared to other forms of real estate investments.
This investment is simpler and easier to understand since there is a deficit of housing everywhere. There is a chance to invest in quality property at moderate prices but with a larger market when you decide to sell. The most significant benefit of investing in residential real estate the ability to make a low down payment. Additionally, getting tenants to occupy your property is easier compared to commercial property.
Commercial real estate
This type of real estate includes retail stores, office buildings, special purpose buildings, and hotels. Commercial real estate requires a longer lease of about 3 years and offers higher returns of about 6 to 12 percent. Keep in mind that you need a huge amount of capital upfront to invest in commercial property. Additionally, finding tenants is a bit harder compared to residential real estate.
Investing in this kind of real estate offers a chance to enjoy triple net rent where tenants are responsible for paying rent and other expenses including insurance, and tax. Commercial properties are given out on long term leases usually about 3 to 5 years. You are likely to enjoy an increase in rent and dealing with non-paying tenants is easier. To raise money to finance purchase of commercial real estate, it is easier to qualify for financing.
Industrial real estate
These are properties including factories, warehouses, storage units, distribution centers, and special purpose properties. Industrial properties come with longer lease terms to offer better returns. The long lease period encourages lower operating costs since these are handled by the tenant. Additionally, industrial real estate is less affected by fluctuations in the market. However, mind about the environmental impacts of your property and local regulations.
How to make a good ROI from real estate apart from renting
Property appreciation
You can invest in real estate at current market value and see it after some time to make a profit. This is good for property in hot selling locations. You don’t need to own a lot of properties to make some good money through this strategy. There are no headaches involves to manage to rent your property and you have an incentive to take good care of your property until the right buyer comes.
Buy-rehab-rent-refinance-repeat (BRRRR)
This involves purchasing distressed real estate below market value and remodeling or developing it to make it appealing to potential buyers. For built-up equity, consider renting it out to refinance better interest rates. This allows raising funds to purchase other properties. Investors need experience rehabbing and renting property after inspections and appraisals to reveal unexpected issues. You can use different financing options to leverage money from other people to purchase your next investment.
Fix and flip
You can buy distressed properties, refurbish them before selling them at a profit. This strategy is ideal when you have contracting experience and appropriate knowledge in local real estate. It allows for optimizing profits when you purchase the right property. Additionally, selling the property after refurbishment allows avoiding the problems associated with renting the property.
Wrapping up
Investing in real estate is a viable investment. Hope you have realized the ideal investment option to make when considering real estate. Government land is cheaper, hassle-free, and offers high-profit potential compared to other options.
