Looking to expand your investment portfolio now that we’re well into 2020? Well, that in itself is an excellent idea because real estate remains to be the best type of investment today. Real estate is a solid investment in the long run because, despite short term fluctuations, it’s so much less volatile compared to stocks.
Still, the best real estate investment may cost you more money upfront. You may have heard of the different types of real estate investment properties that go from owner-occupied rentals to fix and flips and everything in between, but which one should you go with?
What are the different types of real estate investment properties you should consider in 2020? Well, this is the kind of information we have gathered for you to help you make an informed decision as you dip your toes in the ocean that is real estate. We’ll give you different options and make it easy for you to choose the best real estate investment.
Residential Real Estate
There are many types of residential real estate properties that you can invest in, and it all depends on several factors and personal preferences. Each type of property can generate returns differently. Let’s look at some properties you can invest in.
Fix and Flips
Fix, and flips are likely the most common properties you can invest in. These involve purchasing distressed properties and renovating them for profits. This may seem like the best real estate investment property type, but you need to understand that flipping houses are hard work initially.
There is a lot that needs to be learned, and mistakes will be made. Still, this is not to say that it’s not worth your attention because once you break through, then you benefit immensely. One of the most significant benefits of fixing and flipping houses is the fact that it’s possible to make money within just a few months.
On the downside, it is an incredibly cash-intensive real estate investment area. If the fixer-upper market flattens, then your profits will drown with it. You need to know about the local market and have a reliable crew, skilled contractor, an appraiser, and even a title and settlement company for you to succeed.
Long Term Rentals
Long term rental properties are some of the best real estate investments you can venture in. These are not just limited to apartments because most Americans live in single-family homes, quads, duplexes, and even mobile homes. Owning one rental property with multiple units makes management easier for you as the landlord.
Landscaping, plumbing, and maintaining the property is so much easier if it’s in one location. You can even depreciate the value of the building on taxes after writing off the wear and tear after some time. Perhaps the most disheartening drawback of owning rental properties is the responsibility, and more so headache that comes with being a landlord.
It’ll take you some time to find the right tenants, something you must do every time one of them moves out. The maintenance also falls on you in terms of repairs, repainting, and anything else required. Rental properties also come with liability, and there’s always the possibility of a lawsuit.
Owner Occupied Rentals
These are similar to long term rentals, with the only difference being that you also live in the property. The investment property can be anything from an apartment complex, duplex, or triplex, and living there can be an excellent way to pay off your mortgage. One of the significant benefits of this type of real estate property is that you’ll have low-interest rates since it’ll also be your primary residence.
The disadvantage is you’re still going to be a landlord and one who stays and interacts with the tenants. This may not be a con, depending on how you look at it. Some landlords get along with their tenants just fine.
Vacation rentals have been booming for the last few years with the rise of Airbnb and HomeAway. You can rent out the vacation property when not in use. You can make a significant amount, especially if you furnish the property and make it ready for occupancy.
On the downside, this is technically the hospitality industry, and you have to ensure your guests are well taken care of, and they have the right amount of towels, pillows and ensure that the house is tidy at all times. You also have to trust that the tenants will take good care of your property.
Commercial Real Estate Investments
Commercial real estate properties are a different option, and you can purchase them to let out to business owners. The most common commercial properties include retail stores, restaurants, and offices.
You can go beyond that and invest in single-family offices, which has grown in the past years. Check out this database of single family offices to understand more.
You need to understand, though, that investing commercially is more complex and taxing compared to residential properties.
Renting out commercial properties is also different because you will use comprehensive lease agreements instead of rental contracts. You need good credit and a possible down payment of close to 50%. Still, you can tap into the market and make a killing if you know what you’re doing.
Investing in Land
You can never go wrong with investing in land, but unless you put up a farm, then you’ll get zero passive income from it. Beyond that, you should expect to deal with zoning and environmental issues. Accessing utilities may also present a challenge depending on the location of the land.
The Best Real Estate Investment: The Takeaways
Now you know all your options, and you can make the best real estate investment. If you’re a beginner, you may need to hire an agent and have them help you find the right investment property. Apart from understanding the best types of real estate investment, you also need to understand other legal issues, such as insurance and loans.
You need to treat real estate investing as a business, stay focused, and know exactly what you want from your investments. A professional agent will calculate all possible scenarios for you in terms of down payments, taxes, mortgage rates, interest rates, and other factors.
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